Jun 2, 2024 - Business

Tesla, Kroger and American Air all square off vs. shareholders

Illustration of a scale with colored shapes and images of dollars.

Illustration: Gabriella Turrisi/Axios

Two legal cases — and one really big pay package — are figuring prominently in the widening conflict between Corporate America and unhappy investors.

Catch up quick: Filed last year in the 5th U.S. Circuit Court of Appeals (where ExxonMobil has also filed its lawsuit), the National Center for Public Policy Research is suing Kroger for excluding its shareholder proposal.

  • The proposal's ask: for the grocery chain to explain its omission of "viewpoint" and "ideology" from its employment diversity policy.
  • The National Association of Manufacturers later chimed in, raising the question of whether the SEC is even allowed to force a company to speak about topics that aren't relevant to its core business or increasing shareholder value.
  • In short, it's arguing that the shareholder proposal process is violating corporate free speech.

Zoom out: In Spence v. American Airlines, a pilot sued the airline last year, alleging that the company's retirement plan improperly favored environmental and social governance-minded funds and invested with BlackRock, which he claims is a proponent of such investing strategies.

  • The pilot is accusing American of prioritizing ESG goals over maximizing returns for its retirement plan.
  • A judge recently agreed to certify a class, allowing all investors in the 401(k) within certain parameters to participate in the lawsuit.

Meanwhile, vocal opposition is mounting against reinstating Tesla CEO Elon Musk's $56 billion pay package.

What's new: In recent days, CalPERS as well as shareholder advisory firms Glass Lewis and ISS have criticized the proposal, which will be on the shareholder ballot June 13.

What they're saying: "We do not believe that the compensation is commensurate with the performance of the company," CalPERS' Frost said Wednesday in an interview on CNBC.

  • Glass Lewis criticized the package's "excessive size," among other issues.

The Elon side: "What [Frost is] saying makes no sense, as all the contractual milestones were met. CalPERS is breaking their word," Musk posted on X, adding that the pension fund "broke the deal."

  • He also blasted Glass Lewis and ISS for their recommendations.
  • Meanwhile, Egan-Jones Proxy Services advised investors to vote in favor of the compensation, per Reuters.

Yes, but: As with other shareholder proposals, this one is also only advisory.

Between the lines: Musk's compensation was voided by the Delaware Chancery Court in January, so the company is turning to the court of public opinion for support.

  • Tesla could appeal the Delaware decision.

The intrigue: So far, folks are more split on Musk's desire to move Tesla's incorporation to Texas from Delaware — which could give it another avenue to try to reinstate the pay package.

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