Jakarta, hitclubapk3 Indonesia
—
Tesla
facing a big decision this week, whether to pay the CEO
Elon Musk
package
shares
worth up to US$878 billion or around Rp. 14,679.10 trillion (assuming an exchange rate of Rp. 16,711 per US dollar) or risk Musk leaving and the company’s shares plummeting.
The shareholder vote is scheduled to take place Thursday (6/11) local time.The decision of the vote has been called one of the biggest bets in the history of technology companies.
Tesla’s board of directors asked shareholders to support this giant compensation, arguing that only Musk could realize the company’s ambition to become a giant of artificial intelligence, humanoid robots and robotaxi services.
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If Musk meets all targets within 10 years, Tesla’s value is projected to soar to US$8.5 trillion or the equivalent of IDR 142,035 trillion and Musk will control about a quarter of the company’s shares.
Some investors also support it.
“If Tesla shares jump sixfold, I will also profit,” said Nancy Tengler, CEO of Laffer Tengler Investments.
“Why worry about how much money he gets if his vision really comes true?”Tengler said.
However, a number of large shareholders and governance experts consider this compensation package to be high risk.They believe that the Tesla board is too dependent on one figure with the potential for a major conflict of interest, making Musk’s power increasingly unstoppable.
California Public Employees’ Retirement System and
sovereign wealth funds
Norway is among those who reject this plan.They believe that this step could harm share value and make the company too dependent on one person.
Musk previously signaled he could focus more on his other companies, such as SpaceX, xAI and Neuralink, if this compensation package was not approved.Tesla Board Chair Robyn Denholm also continues to remind investors of the big risks if Musk leaves.
“Without Elon, Tesla could lose significant value,” Denholm wrote in a letter to shareholders in October.
However, some corporate governance experts believe that such threats should not make the board give up so easily.
“It’s like he’s threatening himself, ‘Give me $1 trillion,'” said Gautam Mukunda of the Yale School of Management.
“The board’s job is not just to nod every time the CEO asks for something,” he added.
Even though it has received criticism, there are also those who believe that this package is actually in line with investors’ interests.The reason is that Musk will only receive this large compensation if Tesla’s value soars far in the future.
“The numbers are big because the targets are big,” said Krishna Palepu of Harvard Business School.
He added that Musk is also obliged to hold the shares obtained for five years if the target is actually achieved.
Currently Tesla’s market capitalization is around US$1.5 trillion or the equivalent of IDR 25,074 trillion, a figure that depends on the company’s long-term promises rather than the performance of the electric car sector which is currently declining.
Musk’s threat to leave is considered to have put psychological pressure on the board and shareholders.
“If Elon Musk leaves and Tesla’s share price immediately declines, that is certainly not a desirable situation while you are in office,” said David Larcker of Stanford University.
Legal issues also cloud this process.Musk’s 2018 compensation package worth US$56 billion or Rp. 936.04 trillion was annulled by a Delaware court because it was considered too large and full of conflicts of interest.
After that, Tesla moved its legal jurisdiction to Texas, where the rules for suing directors are stricter, including the requirement that shareholders must collectively own at least 3 percent of the shares to be able to file a lawsuit.
Musk currently holds around 15 percent of Tesla shares which will likely be an important factor in this
voting
.Critics say Tesla’s board is now in a difficult position because the company relies heavily on Musk, but has no clear plan if he leaves.
“The question is who is ready to replace this CEO if he leaves or something happens,” says Charles Whitehead of Cornell University.
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