Tesla shareholders told to dump Elon Musk over $80 billion deal

An advisory firm is urging shareholders to dump Tesla CEO Elon Musk, saying he’s an overpaid liability to the company’s success.

An investment advisory firm has encouraged Tesla investors to dump Elon Musk from the company over concerns he’s paid too much and jeopardises its reputation and success.

Pirc UK, a firm that advises UK pension funds among other clients, recommended investors vote against an executive pay deal that “unfairly enriches the chief executive”.

Pirc alleges the board paid themselves too much over a three-year period.

Elon Musk no longer receives a salary for his work as the CEO of Tesla, previously he was paid the minimum wage for the position.

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Overpaid? One advisory firm certainly thinks so. Picture: Brendan Smialowski / AFP)

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Instead he rakes in his money through performance awards and bonuses that are activated when the company achieves certain milestones.

In 2018, Tesla shareholders approved a performance award that could net Musk $US55.8 billion ($A80 billion), more than the company was even worth at the time.

In order to actually get that money he needs to pull off a few significant achievements, including growing the value of the company 10 times over in a 10-year period.

This pay deal is supposed to incentivise Musk to focus on his work at Tesla, given his other ventures including the SpaceX company.

It appears to be working: Tesla just became the most valuable carmaker in the world.

Tesla overtook Toyota to become the world’s most valuable carmaker when its shares rose to a record high of $US1134 ($A1639).

Tesla’s Fremont, California facility. Picture: Justin Sullivan/Getty Images/AFP

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Tesla’s value is largely due to investors speculating on the future of electric vehicles, and while the company is now technically worth more than Toyota, last year the Japanese giant shipped around 30 times more vehicles and brought in 10 times more revenue, according to the BBC.

In May of this year, Musk added around another billion dollars to his already sizeable net worth by meeting targets that give him the opportunity to purchase stock in the company at a reduced rate (around what the shares were worth when the performance award was agreed to in 2018, they’ve more than doubled since).

But Pirc has warned investors to vote against re-electing Musk to the board of the company because of the pay deal, and despite the significant increases in share value, according to The Guardian.

One of the reasons Pirc doesn’t like the Tesla CEO is due to his controversial use of social media, which has landed him and the company in hot water in the past, and which Pirc warns poses an “unnecessary reputational risk to the company”.

Most notably, Musk was forced to step down as chairman of the Tesla board after joking he would take the company private at $420 a share, a significant premium on its share price at the time.

While being investigated over the $420 a share tweet, Musk went on a podcast and smoked (legal) weed, which he calls “pot” and claims to rarely use.

The US Securities and Exchange Commission weren’t laughing and instead began investigating him for stock price manipulation, which ended up costing Musk and Tesla $US20 million a piece ($A28.9 million).

Pirc said this was proof of him causing financial damage to Tesla, and have also advised investors to vote against the reappointment of Robyn Denholm, who replaced Musk when he was forced to step down as chairman.

Musk was also sued for defamation after calling a diver who was helping rescue a group of Thai boys stuck in a cave a “pedo guy” on Twitter.

Musk celebrates after one of his other ventures, SpaceX, recently became the first private company to send people into space. Picture: Joe Raedle/Getty Images/AFP

A jury later ruled Musk’s tweets didn’t meet the legal standards of defamation.

Pirc has also called attention to Musk’s recent tweets about the COVID-19 pandemic.

“Musk has been a vocal opponent of the COVID-19 quarantine, and reportedly required workers to return to work during quarantine, without sufficient precautions/protections and despite protests from workers,” Pirc claimed.

“This concern is furthered as it has also been reported that multiple Tesla employees have tested positive for COVID-19 since returning to work.”

Tesla’s annual general meeting was supposed to happen next Tuesday but has been postponed to September.