June 12, 2024

Communications & Stakeholder Relations
Office of Public Affairs
(916) 795-3991 - newsroom@calpers.ca.gov

SACRAMENTO, Calif. – CalPERS today announced that it will again vote against a multibillion-dollar compensation package that Tesla proposes to give its chief executive officer at the company’s annual meeting on June 13. The package would allow Elon Musk to buy 304 million shares of Tesla stock at its 2018 value, which would be worth approximately $46 billion. CalPERS also opposed the deal when shareholders approved the measure in 2018.

"This exorbitant compensation package is at odds with CalPERS' longstanding views on executive pay," said CalPERS CEO Marcie Frost. "The compensation is excessive when compared to executives at peer companies, highly dilutive to shareholders, and isn’t tied to the long-term profitability of Tesla."

CalPERS has developed an Executive Compensation Analysis Framework (PDF) to help guide decisions on "say on pay" votes. The framework helps CalPERS assess whether executive pay is aligned with company performance and is reasonable relative to peers.

"While we agree that Mr. Musk is entitled to be well compensated for his work, we also believe that a pay package should be commensurate to a company’s performance with reasonable salary caps," Frost added. "These features are absent in the deal as structured."

Some data points highlight the excessive nature of the award:

• The value is approximately $46 billion, accounting for the cost to exercise the options, which is larger than the last four years of Tesla’s aggregate net income of $33.8 billion (2020-2023).
• The award would be highly dilutive to existing shareowners and reduce their ownership proportion.
• While the award does have a five-year holding period, it is concentrated in a single individual.
• Compared with other high-performing companies over the same period, the Tesla option award is nearly 140 times the annual pay opportunity for other high-performing CEOs.
• The payout rewards short-term growth and not sustained profitability. Tesla’s value has fallen by more than half from its peak in 2021.

"We do not think a payout based on short-term market exuberance is warranted without sustained performance," said CalPERS Global Equities Investment Director Drew Hambly. "Additionally, this deal concentrates power in a single shareholder and was negotiated by board members whose independence from Tesla's CEO is questionable. For these reasons, CalPERS could not support the deal in 2018 and remains opposed today."

In addition, CalPERS also announced that it filed an objection in a related matter involving Tesla. Early this year, a judge nullified the 2018 pay package after a shareholder filed suit. The plaintiff’s lawyers have asked the court to award them $5.6 billion in attorneys’ fees, taken in the form of Tesla stock. CalPERS believes this sum is also exorbitant and would dilute shareholders’ interests in Tesla. As a result, CalPERS is joining at least one other Tesla shareholder in protesting this proposed windfall.

CalPERS owned nearly 9.2 million Tesla shares as of June 7.

About CalPERS

For more than nine decades, CalPERS has built retirement and health security for state, school, and public agency members who invest their lifework in public service. Our pension fund serves more than 2 million members in the CalPERS retirement system and administers benefits for more than 1.5 million members and their families in our health program, making us the largest defined-benefit public pension in the U.S. For more information, visit www.calpers.ca.gov.