Glass Lews advised Tesla’s board against giving CEO Elon Musk a $56 billion payout package.
Glass Lewis, a proxy advisor firm, tried to sway Tesla investors away from the $56 billion payout package requested for CEO Elon Musk. The board of Tesla, often considered too close to its CEO to provide constructive criticism to its lead of the company, agrees to the package.
The $56 billion package would come as shares of the company. Elon Musk is already one of Tesla’s largest shareholders, making him the world’s second-richest person after LVMH’s chief executive Bernard Arnault.
The report by Glass Lewis cited an “excessive size” of the package, which if approved would be the largest in corporate America’s history.
Tesla’s board, on the other hand, cheers Musk’s lead, saying it brought the company to unprecedented levels of growth and profits. Musk became CEO of Tesla in 2008, when it reported $2.2 billion in net loss. Today, Tesla is one of the world’s largest companies, making billions in profits every year.
The board had already approved the package but was voided by Judge Kathleen McCormick of Delaware’s Court of Chancery. This year, Tesla’s board voted to move headquarters from Delaware to Texas, where legislation should be more favorable to Musk’s move.
Terrible timing
In addition to its size, Glass Lewis cited Musk’s “slate of extraordinarily time-consuming projects” as a reason to not approve the package. Musk runs several companies and start-ups, from X (formerly known as Twitter), SpaceX, The Boring Company, Neuralink, and xAI.
Moreover, Tesla is currently undergoing a challenging period that could define its very future as an electric vehicle maker.
Competition from China is strangling Tesla’s market share, losing the top spot as the world’s largest EV carmaker to Shenzhen-based BYD. Musk engaged in a fierce price war against Chinese EV companies but failed to regain a competitive advantage.
Tesla also failed to release new, competitive models on the market. Except for the Cybertruck, dubbed a complete disaster by Tesla’s shareholders themselves, the company hasn’t released a new model since 2019. The long-awaited cheap model was reportedly scrapped from release, with the company now focusing mostly on self-driving taxis.
When combined, these factors caused a steep decline in Tesla’s sales, revenues, and profits in the first quarter of 2024. The company had to lay off 14,000 workers, roughly 10% of its global workforce, to cut down on costs.
Tesla needs a board that challenges its CEO’s decisions and focuses on the company’s recovery before it’s too late.
