Many CEOs have successfully resisted efforts to reduce their pay so far this year. The big question now is whether Tesla CEO Elon Musk can do the same. As of June 6, only two out of 340 companies that held shareholder votes on CEO pay had their executive pay packages rejected, according to ISS-Corporate. This failure rate of 0.6% is the lowest since 2020. The most anticipated pay vote in 2024 is happening on June 13 at Tesla, where shareholders will decide whether Musk gets to keep his record-breaking $56 billion compensation package that was awarded in 2018 and then voided this year by a Delaware judge. Critics argue that the excessive compensation should be rejected as it far exceeds the highest US CEO pay from last year and could dilute shareholder value. Top proxy advisers ISS and Glass Lewis have recommended shareholders vote against the pay package, but billionaire Ron Baron supports it, claiming that Musk has earned his pay.
Despite the increasing executive pay, many CEOs have managed to maintain their compensation packages this year. Median pay for S&P 500 CEOs rose to $16 million in 2023 from $14 million in 2022. ISS-Corporate vice president Stephanie Hollinger suggested that the low support for “say-on-pay” proposals in 2024 despite high executive pay could be due to fewer one-time awards and adjustments in 2023. Two companies that successfully defended their CEOs’ pay against challenges were BlackRock and AstraZeneca.
However, some companies like 3M and Zebra Technologies faced challenges in garnering enough shareholder support for their CEOs’ pay. At 3M’s annual meeting, investors rejected proposals to increase certain C-suite pay, citing the company’s legal and financial issues. Similarly, Zebra Technologies saw 60% of investors vote against a pay increase for their CEO.
‘Motivating someone like Elon’
In the final days before the June 13 vote at Tesla, supporters of Musk are making a strong case for his $56 billion pay package to be approved. Investor Ron Baron argued that Musk deserves his pay due to his contributions to the company and the increase in Tesla’s stock price under his leadership.
Baron emphasized Musk’s pivotal role at Tesla, highlighting that without his dedication and high standards, the company would not be where it is today. Musk’s compensation was tied to the company’s performance, and if he had not met the requirements, he would have received zero. When shareholders approved Musk’s original pay package in 2018, Tesla’s market cap was $53.5 billion. As of June 4, the market cap has surged to $550.75 billion, reaching a high of $1.24 trillion in November 2021.
Baron also criticized the lawyers who successfully challenged Musk’s compensation, highlighting their request for $5.6 billion in fees.
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