Tesla’s $2.6 Billion Salary of Elon Musk Not Acceptable for Glass Lewis
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Tesla’s CEO doesn’t make a salary, but because of state law in California, Tesla pays him a little over the $37,000 minimum wage—and that is the salary of Elon Musk.
On March 21, 2018 all shareholders at Tesla, according to the company’s filing on Friday with Securities and Exchange Commission, are voting on a corporate plan and proposal to secure $2.6 billion payday for Elon Musk over the next 10 years.
The proposal has the potential to make Elon Musk richer than Jeff Bezos, the world’s richest person. Bezos is the founder of Amazon, an American ecommerce company.
Glass Lewis, the world’s prominent proxy advisory service provider and the leading independent provider of global governance services, urges the shareholders to thumb down the proposal and make no changes in the current salary of Elon Musk.
“It is peculiar in that it provides increasingly outsized compensation for levels of success ranging from noteworthy to unparalleled,” Glass Lewis stated.
“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 added.
“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.”
In November 2016, Glass Lewis also opposed Tesla’s $2.6 billion merger with SolarCity Corp., a business deal that shareholders approved.
Tesla is advising its shareholders to approve the proposal. Elon Musk, who owns 22% of outstanding shares has said he would not join the voting process. Elon’s brother Kimbal Musk, who is also on the board of directors, will not vote to avoid any issue and conflict on the proposed salary of Elon Musk.
If the proposal is approved by Tesla’s shareholders, this will be one of the riskiest compensation packages in the history of the corporate executives. Once approved, Musk’s stock options would be worth almost $56 billion with an ownership of 28% stake in the company, making Tesla’s worth $182 billion.
The proposed plan requires Musk to remain at Tesla for 10 years and requires the company to grow its market cap by increments of $50 billion to reach valuation of $650 billion.
Tesla is now worth $55 billion. In 2012, Tesla’s market cap was $3.2 billion.