Tesla shareholders should reject CEO Musk’s pay package, Glass Lewis says

By Dana Hull

The shareholders of Tesla Inc. are being urged by a major proxy advisory firm to reject a proposed $56 billion pay package for CEO Elon Musk, in a blow to the electric vehicle maker’s board.

Glass Lewis & Co. made its recommendation in a report released Saturday, citing the “excessive size” of the wage agreement and its dilutive effect if exercised.

“Mr. Musk’s list of extremely time-consuming projects that had nothing to do with the company was well documented before the 2018 grant and only expanded with his high-profile purchase of the company now known as in the report.

The recommendation to major institutional investors could influence their vote on Musk’s pay at the automaker’s annual meeting on June 13. If the proposal is rejected, the CEO could make good on threats to develop products outside of Tesla.

Next month’s vote will mark the second time Musk’s pay package has been put before shareholders. The compensation agreement was originally drafted in 2018, but earlier this year a Delaware judge overturned it because investors were not fully aware of key details.

If Tesla’s board can show that the compensation deal still has broad support, it could help in a legal appeal of the ruling. On the other hand, a loss would be a great shame and show that investors are losing confidence in Musk’s leadership. The vote is advisory only, meaning Tesla can choose to ignore it.

About three-quarters of investors supported Musk’s pay deal six years ago. Glass Lewis advised them to reject the deal at that time, arguing it was too expensive and would dilute other shareholders.

Tesla has tried to counter public criticism of Musk’s compensation with a campaign to win shareholder support. Chairman Robyn Denholm is reaching out to major institutional investors, while a ‘Vote Tesla’ website appeals to the company’s army of private shareholders.

Separately, Tesla is also asking shareholders to vote next month on a proposal to move the company’s articles of incorporation from Delaware to Texas. Glass Lewis recommended voting against the measure, but also voting against the re-election of board member Kimbal Musk, Elon Musk’s brother.

First print: May 26, 2024 | 7:38 am IST