Tesla Shareholders Should Oppose Musk's 76 Trillion Stock Option Proposal

A U.S. proxy advisory firm has recommended that Tesla shareholders vote against a stock option grant plan worth about $56 billion (approximately 76.6 trillion won) for CEO Elon Musk at next month's shareholders' meeting.

On the 26th (local time), according to the Wall Street Journal (WSJ) and others, Glass Lewis revealed this in a 71-page report. Glass Lewis criticized the stock option grant plan as "excessive in scale," stating that it would further strengthen CEO Musk's ownership while diluting the per-share value of Tesla held by shareholders.

[Image source=Reuters Yonhap News]

Previously, Tesla approved a stock option grant plan worth $56 billion for CEO Musk at the 2018 shareholders' meeting. However, this was overturned in January this year when a Delaware court ruled in favor of a minority shareholder's invalidation lawsuit. Consequently, Tesla has resubmitted the stock option grant plan and the proposal to relocate the company's legal domicile to Texas for a vote at the shareholders' meeting scheduled for June 13.

Glass Lewis, which had recommended opposing the stock option grant plan ahead of the 2018 shareholders' meeting, stated that most of the concerns it raised then remain, adding that "the rationale provided by the company (for the stock option grant) is hardly helpful."

The WSJ reported, "If institutional shareholders accept the advisory firm's recommendation, it could influence shareholders' votes at the meeting," adding, "Approval will require not only the roughly 13% stake held by CEO Musk and the shares held by his brother (Kimbal Musk) but also majority support."

Shareholders supporting the stock option grant plan ahead of this meeting emphasize Tesla's market value growth from $50 billion to $570 billion since 2018 and CEO Musk's contributions. However, considering Tesla's recent difficulties such as concerns over slowing electric vehicle demand, declining sales, and a sharp drop in stock price, the WSJ assessed that this large-scale stock option compensation plan is effectively a flashpoint.

Additionally, Glass Lewis recommended voting against the proposal to relocate the company's legal domicile, which is also up for a vote at next month's shareholders' meeting. Regarding the reappointment of two board members, it proposed opposing Kimbal Musk and supporting James Murdoch, former CEO of 21st Century Fox and son of Rupert Murdoch.