CalSTRS Announces They Will Vote Against Tesla CEO Elon Musk’s $50 Billion Compensation Package

California State Teachers’ Retirement System (CalSTRS) Chief Investment Officer Christopher Ailman announced on Monday that the group will vote against reinstating a $56 billion pay package to Tesla and SpaceX CEO Elon Musk, becoming the latest entity promising to not approve such a huge payment before Tesla’s annual meeting on Thursday.

The controversy around Musk’s pay package dates back to 2018. That year, Musk received a pay package from Tesla worth around $50 billion, with that amount being mainly in performance-based stock options. However, the package was frequently challenged, with a bench trial being held in Delaware in 2022. This January, Delaware Chancery Court Chancellor Kathleen McCormick finally ruled against Musk and Tesla. His lawyers had argued that Musk was instrumental in helping Tesla grow and increase its stock price, and would not receive anything if the compensation package was removed.

However, Judge McCormick was unmoved by their argument. In her ruling, she said that “Musk and the Tesla board bore the burden of proving that the compensation plan was fair, and they failed to meet their burden. Musk’s preexisting equity stake provided him tens of billions of dollars for his efforts.”

“Musk launched a self-driving process, recalibrating the speed and direction along the way as he saw fit. The entire process was deeply flawed. Given the collection of people tasked with negotiating on Tesla’s behalf, it is unsurprising that there was no meaningful negotiation over any of the terms of the plan.”

While plaintiffs in the case were happy with the judges ruling, Musk quickly railed against the ruling.

“Never incorporate your company in the state of Delaware,” said Musk in a series of tweets on X after the January ruling. “I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters.”

In February, Musk began to take action. He moved both Tesla and SpaceX‘s state of incorporation from Delaware to Texas, and began looking into another shareholder vote to reincorporate his compensation package. In April he and the Tesla board set up another shareholder vote on the matter set for June.

However, with the vote on Thursday, many top shareholders have announced that they will be voting against the package. On Saturday, Norway’s sovereign wealth fund, Norges Bank Investment Management, announced that they would be voting against Musk’s compensation package, now worth approximately S44.9 billion. On Monday, opposition grew even more as one of their largest shareholders, CalSTRS, said that they would do the the same thing.

In an MSNBC interview, Ailman explained his reasoning, saying that “Musk’s pay package is ridiculous. We’ll pay him 140 times the average worker pay. How about that deal? I think that’s more than fair. Even if these cars had AI in them, they are not worth 60-times earnings. That is absurd.”

“This is a company that has not grown in the last two years, is barely making money per car itself. He needs to focus in either on cars either on X or on going to Mars. And I think his heart really is in going to Mars and getting off the planet. He’s brilliant. I admire him. I’ve listened to him recently at the Milken conference. Amazing speaker. But let’s run this company. It’s an auto manufacturer; let’s go back to making cars and doing it well. He can run SpaceX and run his other efforts and see how they do. He’s focused on Starlink.”

“He’s got a million balls in the air. Focus on a few.”

As of Monday afternoon, Musk and Tesla have yet to respond to CalSTRS voting against him, as well as other shareholders now saying they will do the same.

“Even with Tesla’s headquarters moved out of California and their Incorporation state out of Delaware, they’re still faltering,” explained Los Angeles-based investor advisor James Cross to the Globe on Monday. “Large shareholders rarely get together like this and announce votes early. And this vote is worrisome for Tesla. If they lose on Thursday, it means the shareholders really don’t want Musk to get that money. And if they vote yes, it can go right back to court.”

“Musk and Tesla are very obviously frustrated by the whole thing. They probably regret having California buy so many shares before the company went public. Because now, even after moving out of California, they can still have a lot of control. It will be a very interesting vote coming up to say the least.”

The reapproval vote is set to take place at Tesla’s annual shareholder meeting on Thursday.