Elon Musk’s $56 billion compensation package has been supported by Tesla, which maintains that a new compensation plan would be even more expensive. Only a few days had passed since eminent proxy consulting firm Institutional Shareholder Services (ISS) advised shareholders to reject the plan. According to Tesla, Musk is driven to create big value for shareholders by his generous compensation plan, which is among the highest in corporate America. This stance refutes the assertion made by ISS last week that the salary is “excessive” and raises questions about Tesla’s intention to present a “all or nothing” alternative to shareholders prior to the annual meeting vote on June 13.
Musk is rewarded under the contentious compensation plan, which was determined and approved by shareholders in 2018, based on operational achievements and Tesla’s market value. But in January, a Delaware judge declared the deal unenforceable, which prompted Tesla to think about changing its incorporation state to Texas. Tesla said in a filing on Monday that the advisory firm’s proposal is the result of a “technical misunderstanding” and that it was aware of Tesla’s excellent record under Musk.
According to Delaware law, the ratification process means the proposal must be accepted or rejected in its entirety. Tesla emphasized that creating a new pay package would be significantly more expensive for shareholders. The company estimated that a functionally equivalent grant of new options could result in an accounting charge exceeding $25 billion, compared to the original $2.3 billion charge recognized for the 2018 award.
Tesla concluded its defense by highlighting Musk’s achievements and the fairness of upholding the original agreement. “A deal should be a deal. He delivered on his end of the bargain. It’s time for us to deliver on ours,” the company stated. As the vote approaches, the outcome will reveal whether shareholders align with Tesla’s stance or heed ISS’s advice.