Tesla investors are advised to vote against Musk’s $56 billion salary and move to Texas

News7f May 25, 2024

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Proxy advisor Glass Lewis has urged Tesla shareholders to vote against Elon Musk’s $56 billion bonus and proposed reincorporation of the Texas electric vehicle maker, a blow to the board administration ahead of next month’s important annual meeting.

Glass Lewis said the CEO’s stock option package was excessively dilutive and “too large in size” in a report released Saturday. It also criticized the proposed move to Texas as bringing “uncertain benefits and additional risks” to shareholders.

The proxy advisor also raised issues with Musk’s “list of extremely time-consuming projects,” especially the 2022 acquisition and ongoing overhaul of Twitter, now known as X, which they say they are distracting the billionaire from leading the world’s largest electric vehicle manufacturer. Musk also runs SpaceX, Neuralink and the Boring Company.

Tesla’s board of directors has been mobilize investors to reauthorize a $56 billion award awarded in 2018, which was rejected by a Delaware judge in January due to concerns about its size and the board’s independence. In response, Musk announced he would leave the state and move the company that founded Tesla to Texas.

Tesla chair Robyn Denholm has argued that Musk deserves to be paid that much because the company has met ambitious targets for revenue and stock price. She dismissed criticism that she was too close to the CEO as “crap”.

Glass Lewis’ recommendations are significant because they influence the voting of large institutional investors such as Vanguard, Capital Group, Norges and State Street, all of which are top 10 Tesla shareholders and for the first time first voted against the salary proposal. However, this proposal was passed with 73% approval.

Authorized advisor ISS is expected to release its own report soon ahead of Tesla’s June 13 annual meeting.

While winning the pay vote won’t overturn the court’s decision, the automaker hopes it will demonstrate that investors still support the bid six years later and have may be decisive in subsequent legal appeals.

If successful, Musk’s stake will increase from 13% to more than 20%. A loss would be symbolically damaging to Denholm and the rest of the board, and raise questions about Musk’s future at Tesla. He has threatened to develop future artificial intelligence products elsewhere if he does not gain greater control of the automaker, which he is repositioning as a company. about AI and robotics.

Several major investors have said they are willing to back the award regardless of proxy advice. Baillie Gifford’s flagship Scottish mortgage investment fund told FT this week, it was upheld that Musk had delivered “remarkable corporate performance resulting in tremendous value creation for shareholders.”

Tesla also has to convince thousands of retail investors around the world to vote in favor of the resolutions. They account for about 30% of the shares, an unusually high figure for a listed company and will be crucial to the results.

In the pay vote, a simple majority must be in favor, with the exception of shares owned by Musk and his brother Kimbal. Reincorporation in Texas has a higher standard, requiring a majority of all outstanding shares, meaning those shares not elected will be counted as “nil.”

Glass Lewis also proposed voting against Kimbal’s re-election to office. table of eight peoplewarns “shareholders may view the overall independence of the board of directors as a significant concern.”