Reject $56 Billion Pay Package for Elon Musk, Urges Proxy Advisor

Tesla shareholders were advised to reject the $56 billion pay package for Elon Musk, CEO of the company, by proxy advisory firm Glass Lewis. Such a recommendation followed concerns over the deal’s “excessive size” and its potentially dilutive effect. Moreover, Glass Lewis pointed out that Musk is working on a number of high-demanding projects, such as the recent deal for Twitter, now called X.

The pay package was proposed by Tesla’s board of directors. Critics often cast doubt on their close ties with Musk. The package has no salary or cash bonus but offers rewards if Tesla’s market value hits $650 billion in ten years from 2018. At the moment, Tesla’s market value is around $571.6 billion.

Delaware’s Court of Chancery Judge Kathaleen McCormick nullified the original pay package this January. Shortly after that, Musk made attempts to shift Tesla’s state of incorporation from Delaware to Texas. However, Glass Lewis criticized the proposed move as having “uncertain benefits and additional risk” for shareholders.

Recently, Tesla Board Chair Robyn Denholm defended the pay package. She said that Musk deserves the pay because Tesla has met ambitious revenue and stock price targets. In fact, ever since Musk took the helm as its CEO in 2008, Tesla has seen a radical change in its fortunes. The company transformed itself from posting a $2.2 billion loss in 2018 to posting a $15 billion profit. Besides, the production of Tesla vehicles has increased sevenfold.

Glass Lewis further advised voting against the re-election of Elon Musk’s brother, Kimbal Musk, while the advisory firm backed the re-election of former 21st Century Fox CEO James Murdoch.

Glass Lewis highlighted that shareholders need to consider the implications of the pay package. They added that the deal’s size, potential dilution, and Musk’s many engagements call for a rejection. Moreover, it expressed concern over the added risks of relocating Tesla to Texas. Shareholders will have to consider these factors when voting on the compensation package and board member reelections.