Tesla shareholders advised to vote against Musk’s pay package

Elon Musk, Chief Executive Officer of SpaceX and Tesla and owner of X. (Photo: Reuters)
Elon Musk, Chief Executive Officer of SpaceX and Tesla and owner of X. (Photo: Reuters)

Summary

Proxy-advisory firm Glass Lewis says the proposed compensation would dilute shareholders’ holdings.

Proxy-advisory firm Glass Lewis has advised Tesla shareholders to vote against Elon Musk’s multibillion-dollar pay package at the company’s meeting next month.

In a 71-page report, Glass Lewis told shareholders that Musk’s proposed compensation—recently valued at $46 billion—could dilute their existing holdings in Tesla. The package would concentrate his ownership, making him the largest shareholder “by a healthy margin."

Shareholders will vote at the June 13 meeting on Musk’s pay package and other proposals, including moving the company’s incorporation to Texas, which Glass Lewis also advised against. Proxy advisers’ recommendations can influence shareholder votes, as institutional shareholders look to them for advice.

Musk’s compensation was originally approved by Tesla shareholders in 2018, but it was struck down by a Delaware court in January because of concerns about the approval process. In the ruling, the judge cited Musk’s “extensive ties" with board members and agreed to rescind the package, once valued as much as $55.8 billion.

Tesla last month re-proposed the pay package—which consists of a 10-year grant of stock options—and has tried to persuade shareholders to support the measure in the coming vote.

Since 2018, Tesla’s market value has grown from around $50 billion to $570 billion, and shareholders who support the compensation terms say Musk deserves to be rewarded for hitting performance goals.

Musk doesn’t accept a salary from Tesla, and while he ranks as one of the world’s richest people, most of his assets are tied up in shares of his companies. His hefty pay package has become a flashpoint for the electric-vehicle maker as it faces slowing vehicle sales and tumbling shares.

Glass Lewis had advised against voting for the pay package in 2018, and said most of its concerns remain in the 2024 version.

“The excessive size of the award, both on a pure dollar basis and in terms of the dilutive effect upon exercise, remains very much top of mind," the analysis said. “The company’s provided rationale does little to combat these concerns given their proportionate magnitude."

For the pay package to be approved, a majority of shares voted must support it, excluding Musk’s roughly 13% stake and a much smaller stake owned by his brother.

Write to Ginger Adams Otis at Ginger.AdamsOtis@wsj.com

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