Elon Musk’s $46 billion Tesla pay package in jeopardy as shareholders are advised to vote against his compensation and plans to move the electric vehicle maker to Texas

• Tesla shareholders are being urged to reject a $46bn pay package for Elon Musk 
• Package proposed by Tesla’s board, rewards Musk based on Tesla’s market value
• But the proxy advisory firm has shared concerns citing its ‘excessive size’

Tesla shareholders are being urged to reject a $46 billion pay package for Chief Executive Officer Elon Musk, which if passed would be the largest compensation package for a CEO in corporate America.

Over the weekend, proxy advisory firm Glass Lewis produced a 71-page report citing various reasons including the ‘excessive size’ of the pay deal. 

Glass Lewis also noted how Musk’s proposed compensation could also dilute shareholders’ existing holdings in Tesla.

The report also raised concerns mentioning Musk’s ‘slate of extraordinarily time-consuming projects’ which have expanded with his high-profile purchase of Twitter, now known as X.

The pay package was proposed by Tesla’s board of directors, which has repeatedly come under fire for its close ties with the billionaire. 

The package does not give Musk a salary or cash bonus but sets rewards based on Tesla’s market value rising from $50 billion to as much as $650 billion over the 10 years from 2018. 

The company is currently valued at about $571.6 billion, according to LSEG data.

In January, Judge Kathaleen McCormick of Delaware’s Court of Chancery voided the original pay package which had originally been approved in 2018.  

In the ruling, Judge McCormick cited Musk’s ‘extensive ties’ with board members and agreed to rescind the package, which had once been valued as much as $55.8 billion. 

Musk then sought to move Tesla’s state of incorporation to Texas from Delaware.

Glass Lewis also criticized the proposed move to Texas as offering ‘uncertain benefits and additional risk’ to shareholders. 

Proxy advisers’ recommendations are able to influence how shareholders vote, as institutional shareholders look to them for advice. 

Last month, Tesla then re-proposed the pay package that  consists of a 10-year grant of stock options. 

The company has urged shareholders to reaffirm their approval of the compensation at the June 13 meeting.

Shareholders who support the compensation say Musk deserves to be rewarded for hitting performance goals.

In order for the pay package to be approved, a majority of shareholders must vote to support it, excluding Musk’s roughly 13 percent stake and a smaller and far smaller stake owned by his brother Kimbal Musk.

Glass Lewis had previously advised against voting for the pay package in 2018 with similar concerns remaining in 2024. 

‘The excessive size of the award, both on a pure dollar basis and in terms of the dilutive effect upon exercise, remains very much top of mind,’ the analysis reads.

‘The company’s provided rationale does little to combat these concerns given their proportionate magnitude.’

In an interview earlier this month, Tesla’s board chair Robyn Denholm told the Financial Times that Musk deserves the pay package because the company hit ambitious targets for revenue and its stock price.

Musk became Tesla CEO in 2008. In recent years, he has helped improve results, taking the company to a $15 billion profit from a $2.2 billion loss in 2018 with seven times more vehicles having been produced.

The proxy advisor recommended shareholders vote against the reelection of board member Kimbal Musk, the billionaire’ s brother while former 21st Century Fox CEO James Murdoch re-election was recommended.

Musk currently holds a net worth of $197.3 billion, putting him at number three on the Forbes Real-Time Billionaires List with most of his assets tied up in shares of his companies.

Musk owns 13 percent of Tesla stock but announced a bid earlier this month to secure a quarter of its voting stock. 

‘I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control,’ he wrote on X.

‘Enough to be influential, but not so much that I can’t be overturned.’