Can Exclusive 'Factory Tour' Sway Investors To Give Elon Musk His $56 Billion Pay Vote?

To sway shareholder votes on his controversial US$56 billion pay package, Elon Musk is offering exclusive factory tours next month to just 15 shareholders.

The upcoming vote, to be announced at the company's annual meeting on June 13, is viewed as a test of Musk's leadership. Investors, left in the dark by Tesla's board's silence following the Elon Musk pay controversy, express concern of the billionaire's divided focus due to his other ventures. Also, he has a reputation for making controversial statements that could damage Tesla's image and sales.

Controversial Pay Package Up for Shareholder Vote Again

Tesla is seeking shareholder approval for Musk's compensation package in an atypical public push. The board argues that the pay structure incentivises Musk to prioritise Tesla's success over his other ventures.

Tesla shareholders face conflicting advice on CEO Elon Musk's record-breaking $56 billion pay package, originally approved in 2018. Proxy advisory firm Glass Lewis recommends rejection, citing concerns about the package's size and potential dilution of shareholder value.

In contrast, Tesla urged approval, arguing that compensation incentivises Musk's focus on the company. A judge previously struck down the package due to potential conflicts of interest during its negotiation.

"Don't delay, vote today!" Tesla said on May 28. Tesla announced on its website that a tour of the company's Texas Gigafactory, led by Musk and other executives, will be held on June 12, the day before the annual shareholders' meeting. This tour will showcase the production lines for Cybertrucks and Model Ys.

Nell Minow, vice chair of ValueEdge Advisors, an advisory on corporate governance, described the move as "the last-ditch effort to try to charm retail investors."

Standing out among the top 10 companies in the S&P 500, Tesla boasts the highest percentage of retail investor ownership, with a staggering 44 percent of its common stock held by non-professional shareholders, according to S&P Global Market Intelligence.

Record-Breaking Pay Raises Concerns About Musk's Focus

"I think it just speaks to his grandiosity that he thinks that somehow being in his presence is going to have the results he wants. I don't think he's changing anybody's vote from doing this." Kristin Hull, founder of Tesla investor Nia Impact Capital and an opponent of the pay package, pointed to Elon Musk's divided focus as a key concern.

Musk, the world's richest person, wears many hats. Beyond Tesla's CEO role, he also leads SpaceX, acquired Twitter in 2022, and recently secured US$6 billion in funding for his AI venture, xAI. Though Musk currently holds around 13 percent ownership of Tesla, exercising his stock options could increase his stake to 22 percent, according to a report by Reuters.

However, he has threatened to pursue artificial intelligence development outside of Tesla unless he gains 25 percent voting power. This level requires utilising some of the stock options included in the controversial compensation package.

Musk has emphasised the importance of Tesla's self-driving technology to the company's valuation. He previously stated that without achieving full self-driving capability, Tesla would be "worth basically zero." However, his threat to develop AI projects outside Tesla could undermine this very technology, potentially harming Tesla's overall value.