How hard should Tesla fight for Elon Musk’s attention?

Musk has created the perception in the market that he has one foot out the door with Tesla’s most exciting technologies if he doesn’t get his way..  Leon Neal/Pool via REUTERS/File Photo (via REUTERS)
Musk has created the perception in the market that he has one foot out the door with Tesla’s most exciting technologies if he doesn’t get his way.. Leon Neal/Pool via REUTERS/File Photo (via REUTERS)

Summary

The June vote on the CEO’s 2018 pay package raises questions about what a board should do with a restless but valued leader.

As Elon Musk chases a robot future, the Tesla board is trying to pull off its own breakthrough: time travel.

Specifically, Chair Robyn Denholm is doing her best to put shareholders in a 2018 state of mind as she asks them to re-approve the record pay package given to Musk six years ago—which has since been rescinded by a Delaware judge.

She is also trying to persuade them, in her public messages, that the pay package with its holding requirements motivates the chief executive to “drive the same growth that we’ve seen over the past five years for many years to come."

The challenge for Denholm and the board is that it is actually 2024. And the vote can also be seen as a referendum on how much Tesla needs Musk going forward—even when he is not 100% focused on the electric automaker.

Rejection at June’s shareholder meeting would be a clear signal that investors have grown weary of a less-than-fully engaged CEO—even as he has accomplished incredible things and hit the milestones of the original pay package.

That deal—approved by shareholders in 2018—was intended, according to board committee notes, to ensure Musk remained Tesla’s “fully engaged CEO."

Yet, by some measures, Musk has more on his plate today than he did then—six companies instead of four, with the addition in 2022 of Twitter-turned-X and last year’s creation of artificial intelligence startup xAI. Plus, Musk has become more active in contentious social and political issues that are beginning to show signs of turning buyers off to Tesla’s core business.

All of which comes as Tesla’s growth story has grown murky with pressing competition in China and the company’s product road map turning toward robotaxis and humanoid robots.

Musk defenders argue he devotes significant time and effort to the company that reached achievements impossible without his involvement. They say he juggles his multiple companies in parallel and that allowing his extracurricular activities is how the board keeps him engaged at Tesla.

Still, the board is clearly vying to compete for the superstar CEO’s attention, raising a question: Does he want to work at Tesla, or not?

Amazon.com founder Jeff Bezos eventually stepped aside as CEO and now spends his time pursuing his other interests, including life as a superyacht mogul, keeping swole and tending to the Washington Post and his own outer-space dreams. Other CEOs have juggled multiple businesses or sprawling conglomerates. But when it came to General Electric, for example, there was one share price. In Musk’s case, there are five companies outside of Tesla, all privately held.

And the judge in the Delaware case has suggested that Musk should have been motivated by his pre-existing equity stake in Tesla. “After all, he stood to benefit by over $10 billion for every $50 billion increase" in market value, she wrote. “His equity stake was also a powerful incentive to avoid allowing Tesla to fall in what Musk might consider to be incapable hands."

The company argues that shareholders approved the plan, Musk delivered on it, and now it is only fair for him to get what he was promised.

As shareholders reconsider the matter, it is easy to understand why Denholm and the board would want to evoke 2018. In so many ways, 2018 was a simpler time.

Then, the company was a fraction of its current size—in both valuation and sales volume—and there was a real question of whether Tesla could pull off a bet-the-company gambit to bring out a mainstream EV sedan called the Model 3.

The comp plan—including taking Tesla’s market value to $650 billion from around $60 billion—was seen as a long shot, especially as the company was months behind in ramping up production of the car.

It was also another era for the entrepreneur—one before Musk had pulled off one of the most remarkable corporate turnarounds in a generation and become, in the process, one of the world’s richest men.

It was the era of Elon as the underdog, the guy with a chip on his shoulder trying to prove Motor City and Big Oil wrong as well as all of those short sellers betting—no, rooting—against him.

Hungry Elon; sleeping on the factory floor Elon; staring into the abyss, chewing glass Elon.

There were also echoes of an Elon we know today, one with a wandering sense of imagination, driven to start ambitious new things even if his hands were already full. Then, he had SpaceX and his goal of going to Mars; his brain-computer startup Neuralink and his tunneling company Boring.

Given all of that, it is easy to understand why the board might have felt they needed to make Tesla worth his while, so to speak.

In January, before the judge’s ruling, Musk roiled Tesla investors with tweets that suggested he might take his ideas for AI and robotics elsewhere if he wasn’t given more control of the car company.

“I’m not looking for additional economics," Musk said. “I just want to be an effective steward of very powerful technology."

Some on the board, according to people familiar with the thinking, feel Musk’s tweets were misunderstood. What Musk really intended to say was that he wants new safeguards around the company’s AI, which he argues could be dangerous in the wrong hands.

Whatever the case, Musk has created the perception in the market that he has one foot out the door with Tesla’s most exciting technologies if he doesn’t get his way.

At the same time, Musk needs a successful Tesla. He certainly has other things to do rather than run Tesla, but the core part of his financial empire is based on Tesla’s sky-high valuation, which many on Wall Street think would take a big hit without him at the helm.

Because of that, one can’t help but think this is all just a giant game of chicken.

During the Delaware compensation trial held in late 2022, Musk reiterated a previous statement that he intended to stay at Tesla for life and confirmed he never intended to leave the company had shareholders rejected the original pay package in 2018.

“You viewed Tesla as part of your family, right?" a lawyer asked Musk.

Yes, Musk responded, he did.

Write to Tim Higgins at tim.higgins@wsj.com

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