Proxy Advisory Firm’s Recommendations
Proxy advisory firm Glass Lewis has advised Tesla shareholders to vote against CEO Elon Musk’s proposed $56 billion compensation package, the largest ever proposed for a corporate executive in the United States. This recommendation could heavily impact the upcoming shareholder meeting.
Concerns Raised by Glass Lewis
- Sheer size of the pay package
- Potential dilutive effect
- Concentration of ownership it would solidify
- Musk’s numerous demanding ventures, including managing Twitter
The controversial pay package, put forward by Tesla’s board of directors, has been a focal point of criticism due to the board’s perceived close relationship with Musk. The package includes no salary or cash bonuses but ties rewards to the company’s market value, which must increase to $650 billion within a decade starting from 2018. As of now, Tesla’s market value stands at approximately $571.6 billion.
In January, Delaware’s Court of Chancery Judge Kathaleen McCormick annulled the original pay deal, prompting Musk to consider relocating Tesla’s state of incorporation from Delaware to Texas. Glass Lewis criticised this potential move, warning it could bring uncertain benefits and additional risks for shareholders.
Tesla’s Response
Despite Glass Lewis’s recommendations, Tesla continues to advocate for the approval of Musk’s compensation package. Robyn Denholm, Tesla’s board chair, recently defended the pay package in an interview with the Financial Times, arguing that Musk’s leadership has been instrumental in achieving significant milestones in revenue and stock price.
Since taking the helm as CEO in 2008, Musk has overseen Tesla’s transformation from a company posting a $2.2 billion loss in 2018 to generating a $15 billion profit. Under his leadership, vehicle production has increased sevenfold, according to a campaign website supporting the pay package, Vote Tesla.
Other Recommendations by Glass Lewis
In addition to the compensation package, Glass Lewis also recommended shareholders vote against the re-election of board member Kimbal Musk, Elon Musk’s brother. However, the firm supported the re-election of former 21st Century Fox CEO James Murdoch to the board.
