A second shareholder advisory firm has expressed its opposition to the reinstatement of a pay package for Tesla CEO Elon Musk. Earlier this year, the pay package was invalidated by a Delaware judge.
ISS, along with Glass Lewis, has recommended against the package, which was recently valued by the company at $44.9 billion. However, in January, the package had a value of about $56 billion.
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Tesla shareholders are currently voting on a package that includes electric vehicles and solar panels. The results of this vote will be calculated at Tesla’s annual meeting on June 13.
According to ISS, the grant did not successfully accomplish the board’s initial goals of directing CEO Musk’s attention towards the best interests of Tesla shareholders and aligning his financial interests with those of Tesla stockholders.
ISS, an influential proxy advisory firm, has highlighted several ongoing concerns regarding Elon Musk’s future compensation and the potential impact it may have on shareholder value. In their analysis, ISS emphasized the need for greater clarity and transparency in this matter.
Musk is heavily involved in his other ventures, such as SpaceX, Neuralink, and the Boring Company. In addition, he acquired the social media platform X last year and established a dedicated artificial intelligence unit called xAI.
Last week, Glass Lewis, another prominent proxy advisory firm, joined in recommending against the reinstatement of Musk’s 2018 compensation package. According to Glass Lewis, the package would result in a dilution of shareholders’ value by approximately 8.7%. In their assessment, Glass Lewis noted that the rationale behind the package did not sufficiently take into account the potential long-term effects of dilution on shareholders who are not directly involved in the matter.
According to Tesla, Glass Lewis overlooked the fact that the 2018 award served as an incentive for Musk to generate more than $735 billion in value for shareholders over the span of six years.
According to the filing, Tesla is hailed as one of the most successful enterprises of our time. The company takes pride in revolutionizing the automotive market and being recognized as the first vertically integrated sustainable energy company.
Tesla is currently facing a number of challenges, including a decline in global sales, a slowdown in demand for electric vehicles, an outdated model lineup, and a significant drop in its stock price, which has seen a decrease of approximately 30% this year.
Tesla shareholders were requested to reinstate Musk’s pay package, which had previously been rejected by a Delaware judge earlier this year. Additionally, Tesla also sought to relocate its legal corporate headquarters to Texas.
ISS expressed support for the relocation of the legal corporate home to Texas, while Glass Lewis recommended against it.
The California public employee retirement system, which has an investment in Tesla, is yet to finalize its voting decision on Musk’s pay. However, CEO Marcie Frost revealed in an interview with CNBC that as of Wednesday, the system is not inclined to vote in favor of it. CalPERS, which already opposed a similar package in 2018, intends to engage in discussions with Tesla regarding this matter in the near future.
In January, Delaware Chancellor Kathaleen St. Jude McCormick made a ruling, stating that Musk would not be receiving the groundbreaking stock compensation that was originally supposed to be granted over a span of 10 years.
In response to a lawsuit filed by a shareholder, the pay package was invalidated by the judge. She concluded that Musk’s influence over the board resulted in an unfair compensation process for stakeholders. In her ruling, she highlighted Musk’s close connections with the individuals responsible for negotiating on behalf of Tesla.
Tesla Chairwoman Robyn Denholm recently expressed in a letter to shareholders, which was included in a regulatory filing, that Musk has successfully achieved the desired growth at the automaker. Denholm stated that Tesla has met all of the stock value and operational targets outlined in the 2018 package. Since the implementation of the pay package, Tesla’s shares have surged by an impressive 571%.
Tesla achieved a remarkable milestone by delivering over 1.8 million electric vehicles globally in 2023. However, despite this impressive feat, the value of its shares has been declining rapidly this year due to a slowdown in electric vehicle sales.
Tesla reported a decrease in vehicle deliveries for the first quarter of the year. The company sold 386,810 vehicles from January to March, which is almost 9% lower compared to the same period last year. This decline in sales raises concerns about future growth, especially in an increasingly competitive global market. Additionally, convincing shareholders to support a generous compensation package might prove to be challenging given the current circumstances.
Tesla initiated significant price reductions on several models in the past year, resulting in depreciation of used electric vehicles and impacting the company’s profit margins.
