Proxy firm Glass Lewis urges Tesla shareholders to reject Elon Musk’s $56 billion pay package, citing excessive size and other concerns.

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Tesla

Glass Lewis Report Highlights Concerns Over CEO Compensation

In a recent development, the proxy advisory firm Glass Lewis has recommended that Tesla shareholders vote against a proposed $56 billion pay package for CEO Elon Musk.

If approved, this would become the most significant compensation deal for a CEO in corporate America.

Key Reasons for Rejection

Glass Lewis cited several concerns regarding the pay package, including:

Excessive Size: The firm deemed the size of the pay package as excessively large.
Dilutive Effect: The potential dilutive effect on Tesla’s shares upon exercise was noted as a significant issue.
Concentration of Ownership: Concerns were raised about the concentration of ownership that could result from this deal.
Musk’s Other Commitments: The report also highlighted Musk’s involvement in multiple high-profile projects, including his recent acquisition of Twitter, now rebranded as X, which could distract from his responsibilities at Tesla.

Details of the Pay Package

Tesla’s board of directors proposed the pay package does not include salary or a cash bonus.

Instead, it ties Musk’s rewards to the company’s market value, which needs to reach up to $650 billion over the next ten years starting in 2018.

According to LSEG data, Tesla’s market value currently stands at approximately $571.6 billion.

Legal and Corporate Governance Issues

Earlier this year, Judge Kathleen McCormick of Delaware’s Court of Chancery voided the original pay package.

Following this decision, Musk sought to move Tesla’s state of incorporation from Delaware to Texas, which Glass Lewis criticized as bringing “uncertain benefits and additional risk” to shareholders.

Board’s Stance and Financial Performance

Tesla’s board has urged shareholders to reaffirm their approval of the compensation.

Robyn Denholm, Tesla’s board chair, defended the package in an interview with the Financial Times, stating that Musk deserves it due to the company’s significant achievements, including:

Shareholder Voting and Recommendations

In addition to the pay package, Glass Lewis advised shareholders to vote against the re-election of board member Kimbal Musk, Elon Musk’s brother.

However, the re-election of James Murdoch, former CEO of 21st Century Fox, was recommended.

The upcoming shareholder vote will be a critical moment for Tesla as it navigates these governance and compensation issues, which have attracted significant attention from the investment community.

Conclusion

As Tesla shareholders prepare to vote, the recommendations from Glass Lewis underscore the complexities and controversies surrounding executive compensation and corporate governance.

The outcome will likely significantly affect the company’s future direction and shareholder confidence.