Tesla shareholders raised concerns ahead of the company’s Nov. 6 shareholder meeting regarding the depletion of its stock option pool, which was initially designed for employee compensation. Following the meeting, Tesla issued a letter from Robyn Denholm, the Chairperson of the Board of Directors, who confirmed that a contentious proposal to create a “special share reserve” for CEO Elon Musk received significant approval. This reserve will be part of Musk’s extensive compensation package but is not considered a part of the $1 trillion deal, according to Electrek.
Before the meeting, Electrek reported on “Proposal 3,” which aimed to replenish Tesla’s employee stock option pool, previously exhausted to fund an “Interim Award” of $26 billion to Musk. These shares were intended to reward employees and attract new talent. Proposal 3 merges the employee share allocation with 208 million additional “special” shares valued at approximately $97 billion, exclusively designated for Musk. This means that Musk will possess 3.5 times as many shares as the total set aside for all other employees at Tesla, as stated by Electrek. The proposal stands apart from Musk’s $1 trillion stock award (Proposal 4), which shareholders also backed in the recent meeting.
The importance of reallocating employee compensation raises serious concerns about potential negative repercussions for Tesla’s workforce and future operations. Critics highlight this situation could have adverse effects on employee morale and talent retention. Employee stock options are vital in competitive industries, serving as an incentive that helps companies draw and maintain top-tier talent.
Should Tesla fail to provide enticing stock-based compensations, it may struggle to recruit skilled engineers, dedicated manufacturing staff, and innovative software developers. A shortage of capable individuals in these areas could hinder the company’s ongoing innovation and production capabilities.
As the electric vehicle market continues to expand, with more automakers entering the landscape, Tesla faces increasing competition. Drivers seeking to transition to EVs now have a plethora of choices beyond Tesla, heightening the need for the company to maintain a robust team of talent to sustain its leadership position in the industry.