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Monday, September 27, 2021

High Compensation to Non-Executive Directors is a Concern for Tesla Shareholders

Institutional Shareholder Services, one of the three leading proxy firms, has advised U.S. car giants Tesla Inc. investors and shareholders not to approve the re-election of two Board Directors next month. 

James Murdoch, son to Media Baron Rupert Murdoch and Kimble Musk, younger brother of  

CEO Elon Musk is standing for re-election in October.

According to Bloomberg sources, Institutional Shareholder Services (ISS) on September 24 wrote to clients asking them to vote against directors Kimbal Musk and James Murdoch because of concerns regarding their compensation. ISS is of the view that the two named Executive officers and other non-executive directors are receiving excessive compensation compared to industry standards. 

The annual shareholder meeting of Tesla Inc. on October 7 this year will be held in its new factory in Austin, Texas. Tesla currently has nine Directors on the board of which Murdoch and Musk, both 48 years, are the two incumbents. Murdoch has been the CEO of 21sst Century Fox during the period 2015 to 2019, whereas Musk is a food entrepreneur who is also a director on the board of SpaceX, owned by Elon Musk.

Another director, PE investor Antonio Gracias is not standing for re-election, and there will be no replacement for him. This effectively will bring down the total number of directors to eight. As per Bloomberg news, ISS said that the director’s level of compensation was abnormal compared to other peer companies’ directors. It wondered the rationale behind the high magnitude of stock options given without any explanation. 

“Tesla’s non-executive directors’ compensation is higher compared to what the companies in the GICS sector or the largest U.S. public companies pay to their directors,” ISS observed. 

According to the ISS report, non-executive directors Hiromichi Mizuno and Robyn Denholm received $9.23 million and $5.76 million, respectively. The outgoing director Antonio Gracias was paid $1.19 million towards compensation. 

The major component of the compensation to the three directors was stock option grants. They were valued at $9.21 million to Hiromichi Mizuno, $5.63 million to Robyn Denholm, and $1.16 million to Antonio Gracias.

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Kiara Dawson
Kiara Dawson comes from an Engineering background, with a specialization in Information Technology. She has a keen interest and expertise in Web Development, Data Analytics, and Research. She trusts in the process of growth through knowledge and hard work.

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