In a staunch defense of its CEO's colossal remuneration package, Tesla countered the objections raised by Institutional Shareholder Services (ISS). The electric car company maintained that Elon Musk's compensation, a landmark in corporate history, has been the driving force behind the immense value he has generated for shareholders.
Tesla's response came on the heels of ISS's recommendation to shareholders to reject the $56 billion pay package, citing concerns about its excessiveness and Tesla's all or nothing approach in the upcoming shareholder vote. The compensation plan, approved by shareholders in 2018, hinges on Tesla's market value and operational milestones. However, a Delaware judge struck down the plan in January, prompting Tesla's relocation to Texas.
Tesla asserted that ISS's recommendation stemmed from a misinterpretation of technicalities and acknowledged the firm's recognition of the company's remarkable performance under Musk's leadership. Under Delaware law, Tesla explained, ratification entails an all-or-nothing approach, rendering a new compensation package more costly to shareholders.
The company emphasized that a functionally equivalent grant of new options could incur an accounting charge exceeding $25 billion, significantly higher than the $2.3 billion charge recorded for the 2018 award. Tesla implored shareholders to honor the original agreement, highlighting Musk's fulfillment of his obligations and the company's obligation to reciprocate.
In summary, Tesla's defense centered around the argument that Musk's compensation has been instrumental in the company's success, that a new plan would be more expensive, and that the original deal should be upheld. The company's response aims to sway shareholders to ratify the proposed pay package in the upcoming annual meeting on June 13.
