Tesla’s $2.6 billion payday for Elon Musk faces opposition


Only in the US can a company that is government subsidized nd has never made a dime give the big guy a big compensation package.

Tesla Inc.’s proposal to give Chief Executive Elon Musk an estimated $2.6 billion payday stretched out over a decade would be too costly and too dilutive to shareholders, said one of the two largest independent services meant to advise investors on crucial shareholder votes.

Tesla’s TSLA, +0.73% proposal “is peculiar in that it provides increasingly outsized compensation for levels of success ranging from noteworthy to unparalleled,” while at the same time allowing Musk to keep his distance from the company, proxy service Glass Lewis said in a report Monday.

The potential “up-front and future dilutive impacts to shareholders, along with the possibility of extraordinary pay levels even without commensurately exceptional performance, lead us to recommend that shareholders oppose this proposal,” Glass Lewis said.

Tesla declined to comment on the proxy service’s recommendation. Larger rival Institutional Shareholder Services told MarketWatch it hasn’t made a recommendation yet.

The Silicon Valley car maker unveiled the 10-year plan last month, tying Musk’s pay package to a series of benchmarks, including the ultimate goal of Tesla reaching a $650 million market capitalization. The company’s market value currently hovers around $56 billion.

The pay package was widely hailed as a move to keep Musk as Tesla’s top executive for years to come, or at least serve as its executive chairman and chief product officer, and was modeled on an earlier program for Musk set in 2012.

It calls for granting stock options that would vest in 12 tranches, with each vesting tied to performance goals in market capitalization as well as operational milestones. Tesla put a price tag of $2.6 billion on the plan; Glass Lewis put it around $3.7 billion. If none of the 12 tranches is achieved, Musk would not receive any compensation.

Tesla shareholders also should be wary of further concentration of ownership, Glass Lewis said. If the full grant was earned, Musk would hold 28.3% of the company’s shares, although Tesla said in a filing the resulting ownership would be expected to be less.

Related: Elon Musk’s latest Boring Co. boast: A San Francisco Bay tunnel at 1/10th the cost

“Nonetheless, given that he is currently the company’s largest shareholder and particularly in view of our concerns with the dilution levels resulting from the grant, we are acutely aware of the impact of this arrangement on other shareholders,” Glass Lewis said. “The company indicates that the board was ‘mindful’ of his existing stock ownership levels, but the impact of this consideration is left to the imagination.”

Glass Lewis in November 2016 came out against Tesla’s $2.6 billion merger with SolarCity Corp., a deal shareholders eventually approved. At the time, Glass Lewis called it a “thinly veiled bailout,” while ISS described it as “reasonable” and “necessary.”

Tesla’s board of directors granted Musk’s award on Jan. 21, but its effectiveness is subject to shareholder approval at a special meeting to be held in late March, Tesla has said.