Ahead of Tesla Inc's (NASDAQ:TSLA) annual meeting, a major proxy advisory firm recommended that shareholders vote against CEO Elon Musk's substantial compensation package.
What Happened: Tesla's shareholders have been advised by a significant proxy advisory firm to reject a proposed $56 billion compensation package for Musk.
On Saturday, Glass Lewis & Co. issued a report recommending against the pay deal, citing its "excessive size" and potential dilutive impact, reported Bloomberg.
The firm highlighted Musk's numerous time-consuming projects outside Tesla, including his acquisition of the company Twitter, now known as X.
"Mr. Musk's slate of extraordinarily time-consuming projects unrelated to the Company was well-documented before the 2018 grant, and only expanded with his high-profile purchase of the company now known as X," Glass Lewis said in a report.
The advisory could influence the vote at Tesla's annual meeting on June 13. If shareholders reject the proposal, Musk has hinted he might focus on projects outside Tesla.
This vote marks the second time Musk's pay package is up for shareholder approval, following a Delaware judge's earlier annulment due to insufficient investor information.
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While the vote is advisory, a rejection would be a significant setback for Musk and indicate waning investor confidence.
Tesla's board is actively campaigning for shareholder support, with board chair Robyn Denholm engaging large institutional investors and a "Vote Tesla" website targeting retail shareholders.
Additionally, Tesla is seeking shareholder approval to move its articles of incorporation to Texas from Delaware, a move Glass Lewis also opposes.
The firm further recommends voting against the reelection of board member Kimbal Musk, Elon Musk's brother.
Why It Matters: The recommendation from Glass Lewis comes amid ongoing efforts by Tesla's board to secure approval for Musk's compensation.
Earlier this month, board chair Robyn Denholm emphasized the importance of the pay package for Tesla's future in a plea to shareholders. Denholm's appeal underscored the board's belief that Musk's leadership is crucial for the company's growth and innovation.
Moreover, Tesla's board has been striving to keep Musk's focus on the company amidst his numerous other ventures. On May 18, reports surfaced detailing the board's efforts to ensure Musk remains dedicated to Tesla, highlighting concerns over his divided attention.
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This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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