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Musk’s Tesla pay package is ‘excessive’ and should be rejected, shareholder advocate says
Proxy consulting firm Glass Lewis weighed in on Tesla (TSLA) future shareholder proposals, and once again said CEO Elon Musk’s pay package is a problem.
Currently, Musk’s ownership stake in Tesla is 12.9%, but would increase to 22.4% if the salary package is approved by shareholders, Glass Lewis said.
Glass Lewis first raised concerns about Musk’s compensation in 2018 when it was awarded.
“Glass Lewis raised a number of concerns about the [2018] subsidy, including the amount of compensation and the dilutive impact on disinterested shareholders,” the company wrote in a major report released over the weekend. The company said the previous “more substantive” concerns remain the same.
Elon Musk arrives at the 10th Breakthrough Awards Ceremony on Saturday, April 13, 2024, at the Academy Museum of Motion Pictures in Los Angeles. (Photo by Jordan Strauss/Invision/AP) (Jordan Strauss/Invision/AP)
“The excessive size of the premium, both on a pure dollar basis and in terms of the dilutive effect on the exercise, remains a priority, as discussed in greater detail above. The justification provided by the Company does little to combat these concerns, given their proportional magnitude.”
Glass Lewis also said Tesla’s transfer of its state of incorporation to Texas is unjustified at this time.
Earlier this year, Tesla presented its power of attorney statement ahead of the EV maker’s June 13 shareholder meeting with two big requests: that shareholders vote to ratify CEO Elon Musk’s 2018 salary package, which was rescinded by a Delaware judge earlier this year, and that they agree to transfer Tesla’s state of incorporation from Delaware to Texas.
The Delaware court concluded that the package was awarded to Musk by a board who did not act “in Tesla’s best interests” and showed “almost no evidence of negotiations.” Musk’s 2018 salary package was worth about $56 billion; Glass Lewis’ calculations now state that Musk’s current package is valued at around $44.9 billion.
In its new report, Glass Lewis compared the values of remuneration in the form of stock awards granted to the eight largest companies in the S&P 100 (dubbed the “US megacapitalization”), as well as to companies in the S&P 500 in the automotive sector.
The analysis concluded that the diluting effect of the package given to Musk was extreme. Although the average dilutive effect of all grants awarded by U.S. mega-capitalized companies in the last fiscal year was 1.86% of the stock float (and just 1% for S&P 500 automotive companies), the dilutive effect of the Musk was up an impressive 8.7%, per Lewis’ Glass Calculations.
If that wasn’t enough, Musk threatened to withdraw AI and Tesla’s other high-value technology projects if he does not have approximately 25% controlling interest in Tesla.
Given the size of the pay package and the increased focus on Tesla shares overall, Wall Street expects the vote results could be a difficult time for shareholders.
The story continues
“We view Tesla’s shareholder vote on June 13 as having significance for the company’s long-term strategic direction. While it is impossible to predict the outcome, we expect the event could generate significant volatility in the stock,” Morgan Stanley analyst Adam Jonas wrote in a note to investors last week.
Wedbush’s Dan Ives also expects “fireworks” at Tesla’s June 13 meeting, although he predicts shareholders will approve Musk’s pay package.
Pras Subramanian is a reporter for Yahoo Finance. You can follow it Twitter and so on Instagram.
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