Glass Lewis, a prominent proxy advisory firm, has issued a report advising Tesla shareholders to vote against the recent proposal from the Tesla board of directors to offer CEO Elon Musk a very substantial performance-based rewards package that would apply over the coming decade or so.
That performance-based rewards package, as we noted when it was first revealed, would provide Elon Musk with a path to gaining a ~28% share in Tesla (which at current stock prices would be worth a fortune) — attendant to achieving some rather difficult and ambitious goals.
The report from Glass Lewis read: “The cost of the grant is staggering relative to executive compensation levels among public companies worldwide.” The report also argues that the grant would dilute the investments of other shareholders too much to make sense.
Well, the thing to remember, though, is that goals outlined in the proposed performance-based rewards package aren’t exactly going to be easy to achieve. There’s a strong case to be made that some of them will indeed not be possible for Elon to hit.
The idea behind the rewards package was reportedly to make it clear to investors that Elon Musk would remain as CEO at Tesla for a fair while to come (rather than abscond to focus on SpaceX), and to incentivize the achievement of some impressive long-term goals — goals which of course benefit all shareholders, if they were to be achieved.
Reuters provides a bit more information: “If Musk earned the full grant, he would own 28.3% of the company, although Tesla’s proxy statement showed that his ownership was expected to be lesser, Glass Lewis said in a report dated February 28. … The proxy firm values the award at about $3.7 billion, based on a different valuation model it used.”
Tesla reps unsurprisingly refused to comment when queried on the matter by Reuters.
Since we have a number of Tesla shareholders that comment here regularly, I’m going to pose a couple of open questions here: Do you support the performance-based rewards package for Elon Musk as proposed? Are there any alterations that would make to it if you could?
As it stands, it seems to me to be a pretty good way of incentivizing the achievement of some difficult goals … if I was a shareholder, I would likely be in favor.
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