Introduction
A recent proposal by Tesla’s board has sparked a heated debate between Senator Bernie Sanders and venture capitalist Chamath Palihapitiya. The proposed $1 trillion compensation plan for CEO Elon Musk has been criticized by Sanders, who calls it “insane.” On the other hand, Palihapitiya defends the deal as a performance-based reward tied to revolutionary products.
Sanders Criticizes the Pay Package
Sanders took to social media to express his criticism of the proposed deal, stating that it could give Elon Musk $2 trillion in wealth, more than the bottom 59% of Americans combined. He questioned the sanity of such a deal, asking if anybody in America thinks this is sane.
Key Points
- The proposed compensation plan could give Elon Musk up to $900 billion in stock awards if Tesla reaches market capitalization milestones up to $8.5 trillion.
- Shareholders are set to vote on the plan at the company’s annual meeting on November 6.
- Musk currently has a net worth of $440 billion.
Chamath Palihapitiya Defends the Deal
Palihapitiya, a longtime Musk supporter, rejected Sanders’ framing, arguing that the payout must be earned through consumer adoption of Tesla products. He stated that for Elon to earn that kind of money, many tens of millions of people on earth will need to buy Elon’s products and pay for it with their hard-earned money.
Key Points
- Palihapitiya argues that the payout is tied to the performance of Tesla’s products and is not a handout.
- He believes that for Musk to earn the proposed amount, his products will need to be revolutionary, cheap, and superior on multiple dimensions.
Tesla Board Chair Denholm Defends Musk’s Role
Earlier this month, Tesla board chair Robyn Denholm defended the deal, saying it is designed to retain Musk and secure his leadership for the next stage of growth. She stated that Musk’s compensation is not only about money but also about maintaining influence at Tesla.
Investor Sentiment Remains Strong
Despite the controversy surrounding the proposed compensation plan, investor sentiment remains strong. Goldman Sachs analyst Mark Delaney said Musk’s new performance-based award has boosted investor sentiment, noting Tesla’s stock has climbed 31.54% month-to-date compared to a 4.20% gain for the S&P 500.
Key Points
- Delaney raised his price target on Tesla from $300 to $395, citing improved consumer demand signals and delivery estimates above consensus for the third and fourth quarters.
- Benzinga’s Edge Stock Rankings show that TSLA remains strong over short, medium, and long-term periods.