Tomorrow Tesla shareholders vote on whether Elon Musk will win his executive pay package of more than $50-billion -- an amount six times larger than the combined pay of the 200 highest-paid executives (2021). Large investors like the California Teachers Retirement Fund and Norway’s sovereign wealth fund have indicated that they will vote against it, but the mood of the smaller investors is unclear.
He is already, as we know, very rich: if you worked every day from the time of the building of the Great Pyramids of ancient Egypt until today, you would still only a few percent of the wealth of Elon Musk.
But there is no problem with the ambition of the world’s richest man.
Now, shareholders are being asked whether they were really serious when they promised him that much money.
Back in the day (2018), Tesla dreamed up an unconventional pay package for their CEO. They tied his pay-out to company performance…not performance for making cars, but performance for stock price.
Musk drove those prices up. He beat the drums about self-driving cars, rockets to Mars and robotaxis. The shares shot up to $400, before dropping back to around $175. It is still magically high, raised more by Musk’s legend than by business reality - Toyota makes four times the Tesla amount but its shares are only valued at three-fifths of Tesla’s - so the share price is not really based on the market as much as it is based on the man.
Musk does not take a salary from Tesla. That would be taxable, and Musk is all about avoiding taxes. Instead, he borrows money for whatever he needs, which is paid back by various funds.
In addition to his compensation, Musk has a 13% stake in Tesla, which is worth $75-billion. This amount should keep him tied to the company, despite his threat to walk away. Musk of course is now saying that he is uncomfortable leading Tesla without a 25% share in the vote – a new demand that a legal expert said is “dead on arrival”.
The $56-billion reward is based on Tesla's market value rising to as much as $650 billion over the next 10 years. It does not include a salary or cash bonus. It is still the biggest pay package ever awarded a CEO.
When the Tesla shareholders first promised Musk his pay package, they did not expect that they would be paying out this much. They expected something closer to zero than $56-billion - but he fooled them.
Tesla is incorporated in Delaware, so it was up to a Delaware judge to reject Musk’s pay package, citing it as a sum that was unfair to shareholders. He also noted that the compensation was negotiated by directors who appeared beholden to Musk – trading favors, as it were. Two members, Kimbal Musk, Elon Musk's brother, and James Murdoch, son of tycoon Rupert Murdoch, had close personal ties with Musk. One solution, says a wealth management expert, would be to replace at least three directors with independent board members before negotiating a new pay package for Musk: "Essentially, the entire corporate structure of Tesla has been deemed, like not appropriate for a public company."
The Tesla Board has been criticized for not providing more oversight into Musk’s actions.
On Musk’s watch, electric vehicles have latched on more than anyone would have expected. Today, however, Musk’s inexperience in holding a market-leading position can be seen in a current map of the locations of the two top EV makers:
Musk was the one who started making EVs in China; he showed them the ropes, as it were, and then they hanged him with them.
You can see how that would happen…never happened to anyone else in China.
Tesla shareholders are now voting on whether Musk’s package is fair; if a “yes” vote fails to change the mind of the Delaware judge, Tesla plans to appeal all the way to the Delaware Supreme Court, which will take many months.
Tesla is also asking for shareholder approval at its annual meeting on Thursday to move its corporate domicile to Texas, outside the reach of Delaware courts.
It is the lopsided size of the pay package that makes this case so strange. Logically, to me, it is a straightforward matter of paying Musk what he was promised.
In doing so, however, they are not exactly paying for performance.
Musk is not setting the company up for future growth. He views self-drive and AI as the future.
Tesla recently started offering its North American customers a free month of its Full Self-Driving (FSD) software. Telsa’s FSD isn’t FSD – the driver has to be in control – and is valued by Telsa at $8,000.
Only about two percent of new Tesla owners continuing their FSD membership after the free trial ended.
And this is the value-feature that Musk is betting the entire future of Tesla on.
It has already been involved in major crashes and high-profile investigations.
Musk has tried to push it on other automakers as well, but he’s had no takers yet.
He is hoping that it will evolve into a "robotaxi" service that relies on FSD-like technology. He has said that Tesla will show off a "Cybercab" in August.
Overtaking Tesla in the fast lane is a company called Waymo, which launched a driverless service in 2020. It started in the easiest environment it could find—residential streets in the Phoenix suburbs. It has been gradually been moving up the difficulty level as it gains confidence in its technology.
In the words of one auto expert: “Waymo is just so far ahead that it’s dealing with challenges Tesla hasn’t even started thinking about. Waymo is playing chess while Tesla is still playing checkers.”
In Waymo’s tests of it first 7 million driverless miles, its vehicles got into injury-causing crashes about one-fourth as often as comparable human drivers.
The software is still not ready for mass consumption, however – yet it is literally miles ahead of Tesla.
So Elon has some problems evolving here. He is to blame for the problems, as he constantly over-rode his engineers during the creation of the FSD car. He relied on visual camera data only, instead of going with the addition of ultrasonic sensors, as per his experts’ advice.
In struggling to meet Elon’s targets, at least one of his top executives has been side-swiped.
Tesla China's President, Allen Wang, has been publicly attacked by employees in the China region on social media. His sins are various:
· Setting completely unreasonable targets, which employees must meet before they can leave work. This has forced employees to falsify data, including sales numbers.
· Promoting superficial displays of the Tesla spirit, including having to make calls to clients from their sickbeds while suffering from cancer.
· Resorting to unreasonable means to achieve goals, including the collection of orders through fraudulent means, making sales personnel solely responsible for cancellations and complaints.
· Violating labor laws by forcing employees to work overtime, with a mandate to work on unscheduled days.
From the viewpoint of the Chinese government, these complaints are perfect ammunition. They got Tesla to invest and build up local competition and supply chains, so now there's no need to have Tesla there. Why wouldn't they toss Tesla overboard to allow local Chinese businesses to thrive? It is one way of getting back at the West for the new massive tariffs on Chinese EVs.
Musk is getting into politics of his own. He talks regularly with Trump, and has been pushing an investment in a "data-driven" project to "prevent voter fraud".
Elon has boosted election-related conspiracies. Many of them falsely allege that states do not require IDs when voting. You will see normalization of political violence through conspiracies. He has repeatedly gutted disinformation research teams at X, including half of its election integrity staff in September 2023. He even removed the ability to report election misinformation on the site.
Musk is part of a broader trend of Silicon Valley elite moving hard to the right, like fellow Paypal alumnus David Sacks, who is hosting Trump fundraisers these days.
Speaking of Paypal triggers the thought of AI, and there is commonality in Musk’s’ experiences with them. He was sidelined from leadership at Paypal by Peter Thiel, and became bitter about that. He was also outed from OpenAI, which was co-founded by Sam Altman. Altman clashed with Musk in 2018 when Musk decided he wasn’t happy with OpenAI’s progress. Altman didn’t care what Musk wanted, and Musk, in turn, walked away from the company—and reneged on a massive planned donation.
Which brings us to the current Musk threat to ban Apple devices at his companies.
Apple devices like iPhone now integrate OpenAI at the operating system level. "That is an unacceptable security violation," said Musk. It means that employees at X, Tesla, and SpaceX must put their Apple devices into a Faraday cage – electronic isolation chamber - when they come to work.
Earlier in the day, Apple had announced a range of new AI features across its apps and operating platforms and a partnership with OpenAI to bring the ChatGPT technology to its devices.
This is obviously an open wound with Elon. His ban has less to do with information security than it does with ego security.
Last year, Musk debuted his own AI startup and OpenAI competitor, xAI, saying its goal is to “understand the true nature of the universe.” Musk had filed a lawsuit against OpenAI because he alleged that it had originally set out to develop artificial general intelligence (AGI), “for the benefit of humanity,” but instead created a for-profit company largely controlled by principal shareholder Microsoft.
Musk also has his own AI product called Grok, which is getting its training from the Internet and is not doing very well. "Unfortunately, the Internet (on which it is trained), is overrun with woke nonsense. Grok will get better. This is just the beta," Musk excused recently.
He might also be stinging from an earlier comment:
Wozniak accused Musk of failing to fulfil his promise of delivering self-driving vehicles and raised concerns about the potential risks associated with Tesla’s self-driving AI technology.
Musk might also still resent that time that Apple threatened to boot Twitter from the iOS App Store, likely because Apple was worried that Twitter's content moderation policies are lacking.
Oh yes, and then there’s this: a Tesla investor is suing CEO Elon Musk over allegedly massive insider trading.
He accuses Musk of selling $7.5 billion worth of Tesla shares in late 2022 while knowing that the EV maker wouldn't be able to meet expectations by the end of the year.
"By disposing of $7,530,113,926 worth of Tesla stock in November and December 2022 while he was in possession of adverse, material non-public information, E. Musk exploited his position at Tesla, and he breached his fiduciary duties to Tesla," reads the lawsuit, filed by shareholder Michael Perry.
Perry is calling for an estimated $3 billion to be returned to Tesla and seeking damages from the company's directors for their "reckless disregard." By knowingly selling billions of shares weeks before posting disappointing sales numbers, Perry alleges Musk "breached his fiduciary duties" to both Tesla and its shareholders. Musk profited from his misconduct and his exploitation of material and adverse inside information."
Musk already has a long history of being investigated for possible insider trading.
Altogether, a wild ride over the past month or two for Mr. Musk.
And none of it is on Full Self Drive.
Coming soon, we hear…
Not to even mention the cult of personality that never ends well, the whole FSD concept is wrong on so many levels. Trying to replace humans in a human driven environment - a slow an painful death. Then how are the actual humans going to make money to buy the FSD option or use FSD taxis? And that paired with growing human population? Why focus on electrifying cars that can carry one or two humans (if they have the money to afford it), instead of electrifying and FSD public transportation that can bring people together and promote human creativity and cooperation in making Earth more hospitable for life? Oh, right, the Elon Overlord doesn't care, does he now. He thinks he can live on is own on Mars when Earth becomes uninhabitable.