Tesla’s annual general meeting (AGM) tomorrow will ask shareholders to approve the company’s decision to redomicile in Texas, out of the reach of the Delaware court, to protect Musk’s hefty pay package.
Lindsey Stewart, Director of Stewardship and Policy, Morningstar Sustainalytics, observed:
“We’re also likely to see protest votes against directors again this year. Tesla’s annual shareholder meeting often proves important for defining the boundary of what institutional shareholders are prepared to accept from companies regarding their corporate governance arrangements. That’s certainly true at this year’s meeting. Both CEO Elon Musk and Chair Robyn Denholm have been openly dismissive of the Delaware court’s decision to nullify Musk’s $56bn pay package agreed in 2018. This year’s meeting asks shareholders to re-ratify the arrangement, and to approve the company’s decision to redomicile in Texas, out of the reach of the Delaware court.
Norges Bank, a top ten shareholder thought to hold around 1% of the company’s equity, has already come out to oppose the pay deal. It’s close to certain that several other institutional shareholders will also conclude that the 2018 agreement does not serve the interests of investors. As an indicator, State Street and Northern Trust, also in the top ten of shareholders, opposed last year’s vote on executive compensation at Tesla, as did asset owner CalPERS. So, it’s certainly not the first time Tesla has clashed with major investors on pay. That has left the vote result looking precarious, with the company looking to drum up as much support as possible from its sizeable base of individual investors, who on the whole are more likely to support management but less likely to actually vote.
We’re also likely to see protest votes against directors again this year. Tesla has a classified board, so only two or three directors are elected each year. This year it’s James Murdoch and Kimbal Musk, the CEO’s brother. When both were last voted on in 2021, 30% of shareholders voted against Murdoch’s election and 20% against Kimbal Musk.
Also, once again there are several shareholder proposals on the Tesla ballot this year, seven in total. (Last year there was only one, as a surprise change in meeting timing appears to have wrongfooted proponents.) Two request more shareholder-friendly governance at the company, by reducing director terms to one year and allowing votes to be ratified by a simple majority. Also, two noteworthy resolutions on workforce matters make a return to the proxy card after two years. The proposals request reporting on the company’s anti-harassment and discrimination efforts, and that a freedom of association and collective bargaining policy be adopted. At the August 2022 meeting, two similar proposals were backed by 67% and 48% of independent shareholders (i.e. those not on the Tesla board) respectively.”
