Tesla shareholders are urged to reject a $46 billion pay package for CEO Elon Musk, which, if approved, would be the largest compensation package for a CEO in corporate America.
Over the weekend, proxy advisory firm Glass Lewis produced a 71-page report citing several reasons including the “oversize” of the salary agreement.
Glass Lewis also pointed out how Musk’s proposed compensation could also dilute shareholders’ existing stakes in Tesla.
The report also raised concerns by mentioning Musk’s “list of extraordinarily time-consuming projects” that have expanded with his high-profile purchase of Twitter, now known as X.
Tesla shareholders urged to reject $46 billion pay package for Elon Musk
The pay package was proposed by Tesla’s board of directors, which has been repeatedly criticized for its close ties to the billionaire.
The package does not give Musk a salary or cash bonus, but sets out rewards based on Tesla’s market value increasing from $50 billion to up to $650 billion in the 10 years from 2018.
The company is currently valued at about $571.6 billion, according to LSEG data.
In January, Delaware Court of Chancery Judge Kathaleen McCormick struck down the original pay package that had originally been approved in 2018.
In the ruling, Judge McCormick cited Musk’s “extensive ties” to board members and agreed to terminate the package, which was once valued at $55.8 billion.
Package proposed by Tesla board rewards Musk based on Tesla’s market value
There is also concern about Musk’s “list of extraordinarily time-consuming projects” that have expanded with his major purchase of Twitter, now known as X.
Musk then sought to move Tesla’s incorporation status to Texas from Delaware.
Glass Lewis also criticized the proposal to move to Texas for offering “uncertain benefits and additional risks” to shareholders.
Recommendations from proxy advisors can influence how shareholders vote, as institutional shareholders turn to them for advice.
Last month, Tesla again proposed the pay package consisting of a 10-year stock option grant.
The company has urged shareholders to reaffirm their approval of the compensation at the June 13 meeting.
Shareholders who support compensation say Musk deserves to be rewarded for meeting performance goals.
For the pay package to be approved, a majority of shareholders must vote to support it, excluding Musk’s roughly 13 percent stake and a shrinking stake owned by his brother Kimbal Musk.
Glass Lewis had previously advised against voting in favor of the pay package in 2018 and would maintain similar concerns in 2024.
A proxy advisory firm has shared its concerns citing the “excessive size” of the pay package and is advising shareholders to vote against it at a June 13 meeting.
“The excessive amount of compensation, both in pure dollar terms and in terms of the dilutive effect of the exercise, remains a priority,” the analysis reads.
“The justification provided by the company does little to combat these concerns given their proportional magnitude.”
In an interview earlier this month, Tesla Chairman Robyn Denholm told the Financial Times that Musk deserves the pay package because the company hit ambitious revenue and stock price targets.
Musk became CEO of Tesla in 2008. In recent years, he has helped improve results, leading the company to a profit of $15 billion from a loss of $2.2 billion in 2018. with seven times more vehicles produced.
The proxy advisor recommended shareholders vote against the re-election of board member Kimbal Musk, the billionaire’s brother, while the re-election of former 21st Century Fox CEO James Murdoch was recommended.
Musk currently has a net worth of $197.3 billion, which places him in the number three spot in the ranking. Forbes Real-Time Billionaires List with the majority of their assets invested in shares of their companies.
Musk owns 13 percent of Tesla shares, but announced a bid earlier this month to secure a quarter of its voting shares.
“I feel uncomfortable making Tesla a leader in artificial intelligence and robotics without having roughly 25% voting control,” he wrote on X.
“Enough to be influential, but not so much that they can’t overthrow me.”