Tesla’s decision to grant Elon Musk a $29 billion equity package has set off another battle over the chief executive’s pay. The SOC Investment Group has written to Nasdaq urging it to investigate and “take appropriate remedial action” against the company.
The letter, sent on 19 August to Erik Wittman, deputy general counsel and head of enforcement at Nasdaq, raised what SOC called “serious concerns” over compliance with listing rules and transparency around executive compensation.
The contested award
At the centre of the dispute is the “2025 CEO Interim Award,” a stock package approved by Tesla’s board earlier this month. The board described it as a “first step, good faith payment.” SOC argues the award should have gone to a shareholder vote, as Nasdaq rules require such approval when there are major changes to executive pay plans.
“When shareholders voted on the 2019 Plan it is likely that, based on the available disclosures and research, they did not believe they were voting on an equity plan that would cover compensation to Mr. Musk,” the SOC letter states, adding “precisely because of the ‘truly extraordinary’ nature of the 2018 CEO Performance Award.”
Tied to Musk’s overturned 2018 plan
The new grant is intended to replace Musk’s previous $56 billion package, approved in 2018 and known as the “2018 CEO Performance Award.” That award, the largest of its kind, promised Musk stock options if Tesla hit ambitious targets. Shareholders were told it would be his only form of pay.
Twice struck down by the Delaware Chancery Court due to questions over board independence, the award is now under appeal at the Delaware Supreme Court. Fortune reported that Musk’s new $29 billion grant would apply only if Tesla loses that appeal.
Unlike the earlier plan, the interim award has restrictions. The shares vest in August 2027 only if Musk stays in a top role, whether CEO, chief of product development or operations. He cannot sell the vested shares until August 2030.
No performance targets
Even with these restrictions, critics note the award does not include measurable performance goals. Brian Dunn, director of the Institute for Compensation Studies at Cornell University, told Fortune that experts sometimes call such packages “fog-the-mirror grants.” As he put it: “If you’re around and have enough breath left in you to fog the mirror, you get them.”
SOC’s objections do not focus on the structure of the grant itself but rather on the way it was approved. The group says Tesla’s board circumvented shareholder rights and breached Nasdaq listing policy.
Concerns over board independence
Tejal Patel, executive director of SOC, told Fortune the “real issue is the fact that the original plan … was pretty clear in the disclosures that the company did not intend to include Elon Musk in that plan.”
She acknowledged that compensation issues are normally raised with the US Securities and Exchange Commission but added: “Admittedly, this is the first time I’ve flagged something like this to Nasdaq, [and that’s] because it was a very specific listing standard.” Her reading of the rule is that “this is exactly what it was designed to avoid.”
Patel also said SOC has “real concerns over director independence.” She argued the package reflects the problem of “having a board that is not independent.” The group is troubled by Musk’s multiple commitments outside Tesla, including a brief spell as a White House adviser. “The new compensation plan, if anything, was an opportunity for the board to get Musk to focus on Tesla, and instead they’ve arrived at this package,” she said. She also called the condition allowing Musk to qualify even as chief of product development or operations “pretty unheard-of.”
A long history of opposition
SOC, formerly CtW Investment Group, represents pension funds linked to more than two million union members. It has a record of challenging Tesla’s governance, board independence and pay practices. The group has campaigned against Musk’s 2018 award, urged shareholders to vote against directors such as Kimbal Musk and James Murdoch, and asked regulators to review Tesla’s proposals to reduce the size of its board.
It has also joined investors in filing resolutions on labour rights, urging Tesla to adopt stronger policies on union organising and compliance with international standards.
The SOC letter warns that Tesla’s board may issue more interim awards while the Delaware case is pending, bypassing shareholder votes in the process. It urges Nasdaq to act to “restore ‘the rightful balance between shareholder and management’s interests,’” and to ensure executive pay decisions do not dilute shareholder rights.
Tesla has not yet responded publicly to the letter and did not reply to Fortune’s request for comment.
The letter, sent on 19 August to Erik Wittman, deputy general counsel and head of enforcement at Nasdaq, raised what SOC called “serious concerns” over compliance with listing rules and transparency around executive compensation.
The contested award
At the centre of the dispute is the “2025 CEO Interim Award,” a stock package approved by Tesla’s board earlier this month. The board described it as a “first step, good faith payment.” SOC argues the award should have gone to a shareholder vote, as Nasdaq rules require such approval when there are major changes to executive pay plans.
“When shareholders voted on the 2019 Plan it is likely that, based on the available disclosures and research, they did not believe they were voting on an equity plan that would cover compensation to Mr. Musk,” the SOC letter states, adding “precisely because of the ‘truly extraordinary’ nature of the 2018 CEO Performance Award.”
Tied to Musk’s overturned 2018 plan
The new grant is intended to replace Musk’s previous $56 billion package, approved in 2018 and known as the “2018 CEO Performance Award.” That award, the largest of its kind, promised Musk stock options if Tesla hit ambitious targets. Shareholders were told it would be his only form of pay.
Twice struck down by the Delaware Chancery Court due to questions over board independence, the award is now under appeal at the Delaware Supreme Court. Fortune reported that Musk’s new $29 billion grant would apply only if Tesla loses that appeal.
Unlike the earlier plan, the interim award has restrictions. The shares vest in August 2027 only if Musk stays in a top role, whether CEO, chief of product development or operations. He cannot sell the vested shares until August 2030.
No performance targets
Even with these restrictions, critics note the award does not include measurable performance goals. Brian Dunn, director of the Institute for Compensation Studies at Cornell University, told Fortune that experts sometimes call such packages “fog-the-mirror grants.” As he put it: “If you’re around and have enough breath left in you to fog the mirror, you get them.”
SOC’s objections do not focus on the structure of the grant itself but rather on the way it was approved. The group says Tesla’s board circumvented shareholder rights and breached Nasdaq listing policy.
Concerns over board independence
Tejal Patel, executive director of SOC, told Fortune the “real issue is the fact that the original plan … was pretty clear in the disclosures that the company did not intend to include Elon Musk in that plan.”
She acknowledged that compensation issues are normally raised with the US Securities and Exchange Commission but added: “Admittedly, this is the first time I’ve flagged something like this to Nasdaq, [and that’s] because it was a very specific listing standard.” Her reading of the rule is that “this is exactly what it was designed to avoid.”
Patel also said SOC has “real concerns over director independence.” She argued the package reflects the problem of “having a board that is not independent.” The group is troubled by Musk’s multiple commitments outside Tesla, including a brief spell as a White House adviser. “The new compensation plan, if anything, was an opportunity for the board to get Musk to focus on Tesla, and instead they’ve arrived at this package,” she said. She also called the condition allowing Musk to qualify even as chief of product development or operations “pretty unheard-of.”
A long history of opposition
SOC, formerly CtW Investment Group, represents pension funds linked to more than two million union members. It has a record of challenging Tesla’s governance, board independence and pay practices. The group has campaigned against Musk’s 2018 award, urged shareholders to vote against directors such as Kimbal Musk and James Murdoch, and asked regulators to review Tesla’s proposals to reduce the size of its board.
It has also joined investors in filing resolutions on labour rights, urging Tesla to adopt stronger policies on union organising and compliance with international standards.
The SOC letter warns that Tesla’s board may issue more interim awards while the Delaware case is pending, bypassing shareholder votes in the process. It urges Nasdaq to act to “restore ‘the rightful balance between shareholder and management’s interests,’” and to ensure executive pay decisions do not dilute shareholder rights.
Tesla has not yet responded publicly to the letter and did not reply to Fortune’s request for comment.
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