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Proxy Form Urges Tesla Shareholders to Reject Elon Musk's $56 Billion Pay Package

POSTED ON May 28, 2024 •   BUSINESS      BY Samuel O . Adeniyi
Tesla CEO, Elon Musk | Photo Credit: Gonzalo Fuentes/Reuters

Proxy advisory firm Glass Lewis has made a strong recommendation to Tesla shareholders, urging them to oppose a proposed $56 billion pay package for Chief Executive Officer Elon Musk

If approved, this compensation package would mark the largest pay deal for a CEO in corporate America's history.

The report by Glass Lewis outlined several reasons for its recommendation, including concerns about the "excessive size" of the proposed pay package, its dilutive impact on existing shares, and the concentration of ownership it would entail. 

Additionally, Glass Lewis pointed to Musk's involvement in a range of "extraordinarily time-consuming projects," which have expanded further with his high-profile acquisition of Twitter, now known as X.

The proposed pay package was put forward by Tesla's board of directors, a board that has faced criticism in the past for its close association with the billionaire CEO.

Unlike traditional compensation arrangements, Musk's proposed package includes no salary or cash bonuses. 

Instead, it ties rewards to Tesla's market value reaching up to $650 billion over a 10-year period starting from 2018. Currently, Tesla is valued at approximately $571.6 billion according to data from LSEG.

Earlier this year, Judge Kathaleen McCormick of Delaware's Court of Chancery invalidated the original pay package, prompting Musk to pursue relocating Tesla's state of incorporation from Delaware to Texas.

Glass Lewis also expressed reservations about Tesla's proposed move to Texas, citing "uncertain benefits and additional risk" for shareholders.

Despite Glass Lewis' recommendation, Tesla has urged shareholders to reaffirm their support for the proposed compensation package. 

Robyn Denholm, Tesla's board chair, defended Musk's entitlement to the pay package in a recent interview with the Financial Times, citing the company's achievement of ambitious revenue targets and stock price growth.

Elon Musk assumed the role of Tesla CEO in 2008 and has played a pivotal role in transforming the company's financial performance. 

According to data from an online campaign website, Vote Tesla, under Musk's leadership, Tesla has transitioned from a $2.2 billion loss in 2018 to a $15 billion profit, and production has increased sevenfold.

In addition to its stance on Musk's pay package, Glass Lewis recommended shareholders vote against the reelection of board member Kimbal Musk, Elon Musk's brother. However, former 21st Century Fox CEO James Murdoch's reelection was endorsed by the proxy advisor.

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