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Elon Musk has won the support of major investor and Tesla bull Ron Baron, who founded and leads investment management firm Baron Capital, as Tesla’s board fights for its CEO’s multibillion-dollar compensation package.
“Elon is the ultimate ‘key man’ of key man risk,” Baron said in an open letter made public Wednesday. “Without his relentless drive and uncompromising standards, there would be no Tesla. Especially considering how he slept on the floor of Tesla’s Fremont factory when the company was going through what he called ‘production hell!”
Tesla in 2018 decided on a compensation package that would give Musk the right to purchase up to 304 million shares at a price of $23.34, as long as he met a series of increasingly difficult milestones. Almost 75% of shareholders later approved the package. Despite the difficulty of achieving the goals, Tesla had met enough of them by the end of 2022 for Musk to receive the full package.
But in response to a shareholder lawsuit, a Delaware judge invalidated the pay package, citing the “deeply flawed” process that led to its approval and calling it an “unfathomable sum” that was unfair to investors.
In response, Tesla has put the package back up for a vote at its annual meeting on June 13. Shareholders initially approved the package in 2018 despite objections from some proxy advisors and investors.
If approved again, Musk’s compensation deal would be the largest for an executive in the U.S. The package is currently valued at around $46 billion, although at its peak it was worth $56 billion.
Several of Baron Capital’s funds own stake in Tesla, according to the letter. Tesla accounts for almost 30% of the Barons Partners Fund, which is the firm’s oldest and largest fund. Baron has said his firm has made about 20 times its investment in the electric vehicle maker since he first bought stock in 2014.
Shareholders should ask whether “Tesla is better off with or without Elon,” Baron says in his letter. Tesla supporters have cautioned that, in the unlikely event his payday is denied, Musk will ditch Tesla and focus more time on other companies in his portfolio.
“At Baron Capital, our answer is clear, loud, and unequivocal: Tesla is better with Elon. Tesla is Elon,” he said in the letter.
Baron’s remarks stand in stark contrast from those of groups opposing the pay package, including proxy advisors Glass Lewis and Institutional Shareholder Services, as well as a group of funds represented by New York City Comptroller Brad Lander. Tesla’s biggest retail investor, Leo KoGuan, has said he will also vote agains the package, as has CalPERS.
During an investor briefing held by the SOC Investment Group, Lander criticized Tesla’s board of directors for failing to reign in Musk and provide proper independent governance on behalf of shareholders. Lander’s office manages $271 billion in assets across five NYC retirement funds and hold 3.4 million shares in Tesla.
What Tesla needs, Lander said, is a “full-time CEO” focused on growing the company and not “chasing shiny new objects,” such as xAI. Lander’s funds will vote against the compensation plan and the reelection bids of Kimbal Musk, Elon Musk’s brother, and longtime friend James Murdoch.
“When billionaires are allowed to flout the rules, normal people suffer,” Lander said Tuesday, adding that “a billionaire can’t just have his brother and his besties be the ones to decide what rules they’ll follow, what courts they’ll listen to, and what rules they’ll abide by.”