Glass Lewis tells Tesla shareholders to reject Musk’s US$56b pay
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The news: Proxy adviser Glass Lewis has advised Tesla investors to vote against the upcoming proposal to reincorporate the company in Texas and approve CEO Elon Musk’s USD56 billion ($84.44 billion) pay award.
The numbers: The pay package set rewards based on Tesla’s market value rising to as much as USD650 billion over the 10 years from 2018. In recent years Musk has taken the company to a USD15 billion profit from a USD2.2 billion loss in 2018
The context: According to reports, the Glass Lewis advice published on Saturday said that the “excessive size” of the pay deal, the dilutive effect upon exercise and the concentration of ownership were all reasons to vote against the proposals scheduled for the company’s annual general meeting on 13 June.
Glass Lewis also cited Musk’s “slate of extraordinarily time-consuming projects” which have expanded with his high-profile purchase of Twitter, now known as X. The firm also said that the proposed reincorporation of Tesla in Texas from Delaware created “uncertain benefits and additional risk” to shareholders.
Chair of the Tesla board, Robyn Denholm asked shareholders to approve the relocation and to approve Musk’s pay package in April. Denholm has been lobbying institutional investors to approve the proposals, while a site titled ‘Vote Tesla’ has been created to convince thousands of Tesla’s retail investors to approve the vote. They amount to around 30% of the company’s shares.
Recommendations that come from Glass Lewis are meaningful as they tend to influence how institutional investors vote. Some of Tesla’s largest shareholders include Vanguard, Capital Group, Norges and State Street as institutional investors. Despite the proxy advice, institutional investor Baillie Gifford’s Scottish Mortgage Investment Trust told the FT last week that it was in favour of approving the upcoming proposals.
In February, a Delaware court, where Tesla is currently incorporated, voided Musk’s USD56 billion remuneration package, with judge Kathaleen McCormick ruling that the pay stub had been improperly approved by the company’s board and had short-changed shareholders. The lawsuit had been filed by a number of Tesla shareholders who claimed the award was excessive, despite shareholders having previously approved the pay deal in 2018.
The sources: Capital Brief, Reuters, Bloomberg
