Proactive Investors - Tesla Inc (NASDAQ:TSLA) has backed a proposal to ratify CEO Elon Musk’s $56 billion pay package, warning that a new compensation arrangement would be costlier for the electric vehicle maker.
This comes days after top advisory proxy firm Institutional Shareholder Services (ISS) recommended shareholders vote against the “excessive” pay deal at Tesla’s upcoming annual meeting on June 13.
In a regulatory filing on Monday, Tesla defended the compensation, which was approved by Tesla shareholders in 2018 and rewards Musk based on the electric vehicle maker’s market value and operational milestones.
It said the shareholder recommendation from ISS is based on a “technical misunderstanding” and that the firm has recognized Musk’s strong performance since the compensation package was awarded.
The company highlighted that if the package is not ratified, the Tesla board would need to negotiate a replacement compensation package which it believes is unlikely to be less costly.
"Doing so would present several hurdles for Tesla, including significant time and additional costs, all to the detriment of stockholders," it said.
"A functionally equivalent grant of new options could result in an accounting charge of more than $25 billion, compared to the $2.3 billion charge originally recognized for the 2018 award."