Advisory firm shares thoughts on Musk’s 2018 Tesla pay plan
Is Musk's $56B Tesla Pay Too Much?
Proxy advisory firm Glass Lewis has advised against Elon Musk's $56 billion compensation plan from 2018, citing its excessive size and potential dilutive impact on shareholders. This recommendation comes as Tesla prepares for a re-vote following a Delaware judge's decision to void the original approval. Tesla's board, however, supports the ratification of Musk's compensation and the company's re-incorporation in Texas, encouraging shareholders to vote in favor at the upcoming annual meeting on June 13.
What specific reasons did Glass Lewis provide for recommending a vote against Elon Musk's $56 billion compensation plan?
Glass Lewis, a proxy advisory firm, has recommended that Tesla shareholders vote against CEO Elon Musk's $56 billion compensation plan for several reasons. Firstly, the firm considers the size of the compensation to be excessive. Additionally, Glass Lewis is concerned about the dilutive effect this large compensation could have on current shareholders, potentially diminishing the value of their shares. Another significant concern raised by Glass Lewis is related to Musk's engagement in multiple time-consuming projects outside of Tesla, such as his acquisition of the company formerly known as Twitter, now called X. This involvement raises questions about his ability to dedicate sufficient attention to Tesla's operations. These factors combined have led Glass Lewis to advise against approving the compensation plan.
What are the main concerns related to the dilutive effect of Musk's compensation plan on shareholders?
The main concerns related to the dilutive effect of Elon Musk's $56 billion compensation plan, as highlighted by Glass Lewis, center around the impact it would have on shareholder value. The advisory firm pointed out that the size of the compensation package is excessive and, when exercised, would significantly dilute the holdings of existing shareholders. This dilution occurs because the compensation plan involves issuing new stock options to Musk, which, when exercised, would increase the total number of shares outstanding4. Consequently, this dilution would reduce the proportionate ownership of Tesla held by current shareholders, potentially diminishing their influence and the value of their investment.