Tesla shareholders back paying Musk billions if stock soars

by Frankie Norman March 22, 2018, 2:25
Tesla shareholders back paying Musk billions if stock soars

Tesla would likely regard any result above 70 per cent support for Musk's compensation as a win, reflecting agreement from most investors, said compensation consultant Brent Longnecker. For Musk to get all the options, Tesla would have to become worth $650 billion-more than Facebook-and produce more revenue than Procter & Gamble. The "compensation performance award" will give Musk options with 12 potential vesting tranches if the company hits performance targets on both a top- and bottom-line basis over 10 years, according to the SEC proxy filing.

Proxy-advisory firms Institutional Shareholder Services Inc. and Glass Lewis & Co. had recommended Tesla shareholders vote against the package, calling it too costly. Musk already owned about 22% of Tesla before the stock awards were approved.

Musk satisfied the requirements of his previous pay package, taking Tesla from a tiny startup selling one auto to a company whose market value has surpassed Fiat Chrysler Automobiles and Ford and even challenged General Motors. He also runs the private space firm SpaceX. While it's notorious for attracting droves of short sellers, or investors who bet its stock price will lose value, Tesla shares have also performed extremely well over the long term.

"We believe as a board and executive team that we can achieve these milestones", said board member Antonio Gracias, who points out that under a 2012 incentive package, Musk raised Tesla's market capitalization by 17 times to more than $50 billion previous year.

"If they got that, they would breathe a sigh of relief", he said.

"In addition, we have concerns about the lack of focus on profitability for the company".

A smaller investor, the California State Teachers' Retirement System (CalSTRS), also said it would oppose the award.

The big award aside, Tesla's board has said Musk won't receive any other compensation to underscore that he'll win only if shareholders do, too.

The unprecedented package grants Musk stock awards in 12 increments tied to the electric-car maker's performance over the next 10 years.

Tesla was valued at about $52.46 billion at Tuesday's closing price, according to Thomson Reuters data.

As part of the plan Musk will be granted share options of $2.6bn.

Tesla previously collaborated with Israeli company Mobileye but the companies parted ways in 2016 after a fatal crash involving a Tesla Model S using Autopilot, a semi-automated system created to assist with driving but not replace the driver. The company now is trying to raise production to meet the demand of its Model 3, a mass-market electric vehicle that starts at $35,000. Global automakers from Ford Motor Co to Volkswagen AG are cumulatively investing US$90 billion in electrification over the next five years, with luxury models from Audi and Tata Motors Ltd's Jaguar due this summer.

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