Elon Musk, CEO of Tesla., May 6, 2024. REUTERS/David Swanson
NEW YORK: Tesla Inc shareholders are being urged by a major proxy advisory firm to reject a proposed US$56bil pay package for chief executive officer Elon Musk, in a blow to the electric-vehicle maker’s board.
Glass Lewis & Co made its recommendation in a report, citing the “excessive size” of the pay deal and the dilutive effect upon exercise.
“Mr Musk’s slate of extraordinarily time-consuming projects unrelated to the company was well-documented before the 2018 grant, and only expanded with his high-profile purchase of the company now known as X,” said Glass Lewis in the report.
The recommendation to large institutional investors may sway their vote over Musk’s pay at the carmaker’s June 13 annual meeting. If the proposal is rejected, the CEO may make good on threats to develop products outside of Tesla.
Next month’s vote will be the second time Musk’s pay package has been put before shareholders. The remuneration deal was originally crafted in 2018, but earlier this year a Delaware judge voided it, saying investors weren’t fully informed of key details.
If Tesla’s board can show the compensation deal still has broad support, it may help with a legal appeal of the ruling. On the other hand, a loss would be a major embarrassment and demonstrate investors are losing faith in Musk’s leadership. The vote is only advisory, meaning Tesla can choose to ignore it.
About three-quarters of investors supported Musk’s pay deal six years ago. Glass Lewis recommended they reject the deal at that time, arguing it was too costly and would dilute other shareholders.
Tesla has been seeking to counter public criticism of Musk’s compensation with a campaign to win shareholder support. Board chair Robyn Denholm is reaching out to large institutional investors, while a “Vote Tesla” website is appealing to the company’s army of retail shareholders.
Separately, Tesla is also asking shareholders to vote next month on a proposal to move the company’s articles of incorporation to Texas from Delaware. — Bloomberg
