Institutional Shareholder Services advised Tesla shareholders this week to reject a proposed $2.6 billion compensation package for company founder Elon Musk, joining fellow proxy advisory firm Glass Lewis in opposing the award ahead of a March 21 vote.
Unveiled last January, the proposed pay package would award Musk billions of dollars’ worth of stock grants over 10 years, based on projections that Tesla’s market value would rise from its current level of $55 billion to $650 billion in the next decade. While company projections place Musk’s total compensation at an estimated $2.6 billion, ISS said the actual amount was worth $3.7 billion.
ISS said the package “locks in unprecedented high pay opportunities for the next decade, and seemingly limits the board’s ability to meaningfully adjust future pay levels in the event of unforeseen events or changes in either performance or strategic focus,” according to a statement obtained by Reuters.
The firm also said the package would allow Musk to earn most of the award regardless of whether Tesla turns a sustainable profit, adding that “it is questionable whether an additional $2.6 billion grant is necessary or appropriate” to keep Musk focused on Tesla, given his current 22% stake in the company.
ISS’s recommendation came days after Bloomberg reported that Glass Lewis, Tesla’s second-largest proxy adviser, said the proposal would be too costly and dilute the stakes of other top investors.
“Any relative comparison of the grant’s size would be akin to stacking nickels against dollars,” the firm said, according to Bloomberg.
In addition to founding the electric car company, Musk founded SpaceX and the Boring Company, which digs tunnels to facilitate the installation of “Hyperloop” transportation hubs in major cities.