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Tesla shareholders advised to reject Elon Musk’s USD 56 billion pay

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The Tesla board of directors, which has faced criticism for its close relationship with the billionaire, suggested the compensation package

Glass Lewis, a proxy advisory firm, said that it has urged Tesla shareholders to reject Elon Musk’s proposed USD 56 billion compensation package. It would be the highest compensation package ever for a CEO in corporate America, if approved.

The report listed factors including ownership concentration, the dilutive effect upon exercise, and the “excessive size” of the pay arrangement. It also mentioned Elon Musk’s “slate of extraordinarily time-consuming projects,” which has grown since his well-publicised acquisition of Twitter, which is currently known as X.

The Tesla board of directors, which has faced criticism for its close relationship with the billionaire, suggested the compensation package. The benefits are contingent on Tesla’s market value increasing to as much as USD 650 billion over the course of ten years beginning in 2018 and do not include a salary or cash bonus. LSEG data indicates that the company is currently valued at approximately USD 571.6 billion.

Judge Kathaleen McCormick of Delaware’s Court of Chancery revoked the initial compensation package in January 2024. Afterwards, Elon Musk attempted to have Texas replace Delaware as Tesla’s state of incorporation.

Additionally, Glass Lewis blasted the proposed relocation to Texas, saying it would expose shareholders to “uncertain benefits and additional risk.”

Tesla has requested that its investors confirm that they are in favour of the pay.

In a Financial Times interview this month, Robyn Denholm, the chair of Tesla’s board, stated that Elon Musk is deserving of the compensation package because the company has exceeded its high sales and stock price goals.

In 2008, Elon Musk took over as the CEO of Tesla. Over the years, he has played a key role in enhancing the company’s performance, leading to a significant improvement in financial outcomes. As per a report on the Vote Tesla website, the company went from a USD 2.2 billion loss in 2018 to a USD 15 billion profit, and the production of vehicles has increased sevenfold.

The campaign website also suggested that shareholders vote against Kimbal Musk, the billionaire’s brother, for board re-election, while recommending the re-election of former 21st Century Fox CEO James Murdoch.

The row over the USD 56 billion compensation package comes at a time for the automaker, as it recently trimmed down its goal of delivering 20 million vehicles a year by 2030, another sign the company was moving away from electric cars as it shifted focus to robotaxis.

Elon Musk said in 2020 that Tesla aspired to sell 20 million vehicles by the end of the current decade, twice as many as those sold by Toyota, the world’s largest automaker. It had reiterated the goal in its 2021 and 2022 impact reports.

However, the company has changed its tack, dropping plans to produce an all-new model that was expected to cost USD 25,000, while touting autonomous driving technology as its main source of growth. It plans to host a launch event for its robotaxi on August 8.

Robotaxis and Tesla’s humanoid robot Optimus will be “incredibly profound” for Tesla, Elon Musk said through a video link at the annual “Viva Technology” conference in Paris.

Elon Musk said in April 2024 that Tesla planned to bring forward the launch of new models, including affordable cars by the year-end. However, the automaker now plans to use the current product lines for new affordable vehicles instead of new facilities, making a strategic change that would result in smaller cost reductions than expected and modest volume growth.

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