Glass Lewis Urges Tesla Shareholders to Reject $56 Billion Pay Package

Proxy advisory firm Glass Lewis has urged Tesla shareholders to reject CEO Elon Musk’s $56 billion pay package. If approved, this would be the largest pay package for a CEO in corporate America.

Reasons for Rejection:

Glass Lewis cited several reasons for its recommendation:

Excessive Size: The pay deal’s size is considered excessive.
Dilutive Effect: Concerns about the dilutive effect upon exercise.
Concentration of Ownership: The high concentration of ownership is problematic.
Time-Consuming Projects: Musk’s involvement in other demanding projects, including his acquisition of Twitter (now X), further complicates the justification for such a large package.

Details of the Pay Package:

The pay package proposed by Tesla’s board of directors includes no salary or cash bonus. Instead, it sets rewards based on Tesla’s market value rising to as much as $650 billion over 10 years from 2018. According to LSEG data, Tesla is currently valued at approximately $571.6 billion.

Legal and Relocation Issues:

In January, Judge Kathaleen McCormick of Delaware’s Court of Chancery voided the original pay package.

In response, Musk sought to move Tesla’s state of incorporation from Delaware to Texas. Glass Lewis criticized this proposed move, highlighting “uncertain benefits and additional risk” for shareholders.

Tesla’s Position:

Tesla has urged shareholders to reaffirm their approval of Musk’s compensation. Board chair Robyn Denholm defended the pay package in a recent Financial Times interview, stating that Musk deserves it because the company is meeting ambitious revenue and stock price targets.

Achievements Under Musk:

Musk, who became Tesla’s CEO in 2008, has significantly improved the company’s performance:

Transitioned from a $2.2 billion loss in 2018 to a $15 billion profit.
Increased vehicle production sevenfold.

These achievements are highlighted on the online campaign website Vote Tesla.

Recommendations on Board Member Elections:

Glass Lewis also urged shareholders to vote against the reelection of board member Kimbal Musk, Elon Musk’s brother. However, the firm recommended the reelection of former 21st Century Fox CEO James Murdoch.