Ahead of a shareholder vote next week, (NASDAQ:TSLA) Board Chair Robyn Denholm is asking shareholders to ignore the recommendations of proxy advisor firms, unions, and corporate watchdogs and approve CEO Elon Musk’s unprecedented compensation package.
Contingent on his achievement of ambitious benchmarks including an $8.5 trillion market value and expanding Tesla’s (NASDAQ:TSLA) robotaxi business over the next 10 years, Tesla (NASDAQ:TSLA) will reward Musk with a staggering financial haul and expanded control of the company.
“Do you want to retain Elon Musk as Tesla CEO and motivate him to drive Tesla to become the leading provider of automation solutions and the most valuable company in the world,” Denholm asked during an interview on CNBC Monday morning.
The Tesla (TSLA) board proposed a $1 trillion compensation package for Musk to be paid in shares over twelve tranches if certain goals are achieved, increasing his voting power to 25% in the company at a time when AI and robotics could exceed the company’s achievements in vehicle electrification.
“I don’t feel comfortable building a robot army and then being ousted because of recommendations by ISS and Glass-Lewis,” Musk said on Tesla’s third quarter earnings call.
“The core problem here is that so many of the index funds, the passive funds vote along the lines of whatever Glass Lewis and ISS recommend…and they have made terrible recommendations in the past that if those had been followed would have been extremely destructive to the future of the company,” Musk added.
In her letter, Denholm agrees, saying the proxy advisory firms “weren’t built to evaluate companies like Tesla.”
“Their model is based on standardized benchmarks, conventional, one-size-fits-all thinking designed for the average company. But Tesla isn’t conventional, and neither is the size of our financial returns,” Denholm wrote, noting shareholder return of 39,000% since going public.
Citing the “excessive dilution” to shareholders that could result from Musk’s extraordinary pay levels, as well as the increased voting power and control it will give Musk, ISS and Glass Lewis are recommending shareholders vote against the compensation package, as well as the planned advisory vote on Tesla (TSLA) taking a stake in the xAI business.
The compensation package will go to a shareholder vote at the annual meeting on November 6.