Tesla shareholders should reject CEO Elon Musk’s $56 billion pay package, according to proxy advisory firm Glass Lewis, which highlighted the “excessive size” of the deal and its potentially negative impact on smaller shareholders.
The recommendation from the influential proxy advisory firm comes as Tesla is asks its shareholders to vote again on his 2018 pay package, after a Delaware judge ruled earlier this year voided the payoutthe largest compensation plan in corporate America.
Tesla shareholders will vote on the pay package on June 13. The company did not immediately respond to a request for comment on Glass Lewis’s recommendation to vote against the pay deal.
Institutional investors rely on proxy advisory firms to provide research and advice on how to vote at annual and special meetings on public company proxy proposals, which can range from executive compensation to corporate governance issues. In the case of Tesla, Glass Lewis wrote in a 71-page report shared with CBS MoneyWatch that Tesla shareholders risk dilution of their shares if Musk gets the huge stock grant, meaning their shares could be worth less become.
The proxy advisory firm also noted that Musk is well compensated by his current 12.9% stake in Tesla, a stake valued at about $74 billion according to the Bloomberg Billionaires Index. Musk does not receive a salary from Tesla, but Glass Lewis noted that his shares in the company already mean his interests are aligned with those of the company.
The value of Musk’s current stake in Tesla “challenges the basis on which the 2018 subsidy, however structured and large, was even necessary,” Glass Lewis wrote.
Dilution occurs when a company issues additional shares, reducing the proportional ownership stake of pre-existing shares. Under Musk’s 2018 pay deal, Tesla would issue about 304 million new shares, creating a dilution effect of about 9%, the company said.
“[T]These concerns are further exacerbated by the concentration of ownership in Mr. Musk,” the report said, noting that Musk would increase his ownership stake to 22.4% if the 2018 pay package were approved next month. Musk would be the company’s largest shareholder by a healthy margin.”
It added: “Given the impact on the assets of other shareholders, the continued concentration of ownership around Mr. Musk deserves particular attention.”
