TSLA
In a substantial update for shareholders of Tesla (NASDAQ: TSLA), proxy advisory firm Glass Lewis has sent a strong message urging them to reject an astounding $56 billion compensation plan proposed for the company’s CEO, Elon Musk. This proposed pay package would mark a landmark event in corporate America, potentially becoming the largest CEO compensation ever recorded.
Glass Lewis has cited several concerns about this proposal. Firstly, they highlight the "excessive size" of the compensation, which they suggest could lead to significant dilution upon exercise and would consolidate even more ownership under Musk, whose plate is already too full with multiple time-consuming ventures. This includes his high-stakes acquisition of Twitter, now rebranded as X, which further complicates his schedule.
The controversial pay deal, initially put forward by Tesla’s board of directors, has been in the spotlight for quite some time. Critics have pointed out that Tesla's board members share close ties with Musk, which has led to some tension over potential conflicts of interest. According to the plan, Musk would receive no salary or immediate cash bonus. Instead, the reward structure would depend on Tesla’s market valuation skyrocketing to an eye-watering $650 billion over ten years from its inception in 2018. Currently, Tesla’s market value hovers around $571.6 billion.
Earlier this year, Judge Kathaleen McCormick of Delaware’s Court of Chancery nullified the original pay package, prompting Musk to push for a shift in Tesla’s state of incorporation from Delaware to Texas. Glass Lewis voiced their disapproval of this relocation, pointing out that it comes with "uncertain benefits and additional risks" for shareholders.
Tesla, on its part, remains steadfast in its call for shareholder approval of Musk’s compensation deal. Robyn Denholm, Tesla's board chair, defended the package in a recent interview, citing Musk's pivotal role in achieving ambitious revenue and stock price goals. Not to mention, since Musk took the CEO reins in 2008, Tesla has gone from a $2.2 billion loss in 2018 to a $15 billion profit, and the company now produces seven times more vehicles than before.
In another recommendation, Glass Lewis advised shareholders to vote against the re-election of Kimbal Musk, Elon Musk’s brother, to the board. However, they gave a thumbs up for the re-election of James Murdoch, a former CEO of 21st Century Fox, to continue his stint as a board member.
