Glass Lewis: Tesla shareholders should reject Musk's pay deal
Should Tesla Reject Musk's $56B Pay Deal?
Tesla shareholders face a pivotal vote on June 13 regarding CEO Elon Musk's $56 billion pay package. Glass Lewis, a shareholder advisory firm, recommends voting against the deal, arguing it could overly dilute shareholder stakes and disproportionately increase Musk's control over the company. The board has yet to address these governance concerns effectively.
Why is the shareholder advisory firm Glass Lewis recommending that Tesla shareholders vote against Elon Musk's compensation plan?
The shareholder advisory firm Glass Lewis is recommending that Tesla shareholders vote against Elon Musk's compensation plan due to concerns about the package's excessive size and its potential dilutive effect on existing shareholders' stakes in Tesla. The firm believes that the proposed $56 billion pay package would grant Musk a significantly larger share in the company, making him the number one largest shareholder by a considerable margin. Glass Lewis argues that the Tesla board has not provided sufficient rationale to address these concerns, raising questions about the board's allegiance – whether it is working for the shareholders or for Musk.
How might Elon Musk's pay package impact the dilution of existing shareholders' stakes in Tesla?
Potential Impact on Shareholder Equity
Elon Musk's proposed $56 billion pay package could significantly impact the dilution of existing shareholders' stakes in Tesla3. The advisory firm Glass Lewis has raised concerns that the compensation plan would issue approximately 304 million new shares3. This issuance is estimated to dilute the proportional ownership of existing shareholders by about 9%. Such a dilution would not only decrease the relative share of ownership for current shareholders but also potentially reduce the value of their shares if the market perceives the dilution negatively3.
Increased Ownership for Musk
The issuance of new shares under Musk's pay package would also increase his stake in the company significantly, from less than 13% to about 22.4%. This would make him the largest shareholder by a substantial margin. The advisory firm Glass Lewis has pointed out that this could lead to a governance concern, where the balance of power within the company might shift too heavily in favor of Musk, potentially at the expense of other shareholders' interests and influence within the company3.