Tesla shareholders urged to nix Elon Musk's $56B pay package
Proxy advisory firm Glass Lewis argues Musk's $56 billion pay package is excessive
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Tesla shareholdersset to vote this week on reinstating CEO Elon Musk's $56 billion pay package, which was voided earlier this year by a Delaware judge, are being urged by a proxy advisory firm to nix it.
Glass Lewis said Saturday it urged Tesla shareholders to reject the staggering package, citing its "excessive size," the impact of Musk exercising the stock options and the concentration of the company's ownership.
It also cited Musk's "slate of extraordinarily time-consuming projects" which have increased following the acquisition of Twitter, now known as X, where Musk serves as chief technology officer and executive chairman. Musk is also the CEO of SpaceX and artificial intelligence firm xAI, and is the founder of Neuralink and The Boring Company.
Tesla's board of directors proposed the reinstatement of the pay package, which has no salary or cash bonus and offers rewards in the form of stock options that are awarded based on Tesla's market value rising to as much as $650 billion over the 10 years following 2018. The company is currently valued at about $571.6 billion, according to LSEG data.
TESLA ASKS SHAREHOLDERS REINSTATE ELON MUSK'S PAY, MOVE TO TEXAS
Tesla is urging shareholders to vote in favor of reinstating Elon Musk's $56 billion pay package. (Photo by Apu Gomes/Getty Images / Getty Images)
Musk's original pay package was voided in January in a ruling by Judge Kathaleen McCormick of Delaware's Court of Chancery. She ruled in favor of a lawsuit brought by a shareholder to strike down the package and wrote in her decision that the package was excessively large as it was by far the largest compensation package for the CEO of a publicly traded company.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| TSLA | TESLA INC. | 178.01 | -4.46 | -2.44% |
McCormick also faulted the Tesla board of directors for failing to fully disclose to shareholders the close relationship between the directors who approved the compensation package and Musk, as well as the relative ease with which Tesla would achieve the benchmarks tied to tranches of his compensation plan given the company's growth at the time.
TESLA TO TEXAS? ELON MUSK ANNOUNCES MAJOR SHAREHOLDER VOTE
Musk has moved SpaceX headquarters from Delaware to Texas and is looking to do the same with Tesla. (Photo by Michael M. Santiago/Getty Images / Getty Images)
Tesla has urged shareholders to reaffirm their approval of Musk's compensation plan. In an interview with the Financial Times earlier this month, Tesla board chair Robyn Denholm said that Musk deserves the pay package because the company hit ambitious targets for revenue and its stock price.
In the wake of the January ruling that voided the pay package, Musk moved to change Tesla's state of incorporation from Delaware to Texas – a proposition shareholders have also been asked to vote on.
ELON MUSK'S $56 BILLION PAY PACKAGE VOIDED BY JUDGE
Tesla reported its first quarterly sales decline in nearly four years in the first quarter of this year. (Photo by Justin Sullivan/Getty Images / Getty Images)
The proxy advisor recommended that shareholders oppose the change in Tesla's incorporation state, saying there would be "uncertain benefits and additional risk" to shareholders from the change.
Musk has served as Tesla CEO since 2008 and has helped drive the EV-maker's rise to the most valuable automaker in terms of market capitalization. He brought the company from a $2.2 billion loss in 2018 to a $15 billion profit and has increased vehicle production by a factor of seven, according to the Vote Tesla campaign website.
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The company has faced headwinds amid a cooling of consumer interest in EVs, with Tesla reporting a sales volume decline in the first quarter for the first time in nearly four years.
Reuters contributed to this report.