Tesla's Elon Musk Compensation Plan Receives Major Endorsement from Florida State Board

Tesla has received a significant boost of confidence for its proposed $1 trillion compensation plan for CEO Elon Musk. The State Board of Administration of Florida (SBA) announced its intention to vote in favor of the plan, mirroring its support for Musk's previous 2018 performance award. This endorsement stands in contrast to recommendations from major proxy advisory firms.

Key Takeaways

• The State Board of Administration of Florida (SBA) will vote to support Elon Musk's $1 trillion compensation plan.

• The SBA cited Musk's past performance in driving company growth and shareholder value as reasons for their support.

• This endorsement contrasts with the opposing recommendations from proxy firms ISS and Glass Lewis.

• Elon Musk has strongly criticized ISS and Glass Lewis, calling them "corporate terrorists.

• Shareholders are set to vote on the compensation package on November 6.

SBA's Strong Support for Musk's Compensation

The SBA submitted a filing to the Securities and Exchange Commission (SEC) stating its intention to support Musk's compensation plan. The board highlighted that the total return on Tesla's stock since the 2018 performance award, along with prior incentive plans, leads them to strongly back the proposed 2025 CEO performance award. They believe the plan aligns management incentives with shareholder interests and focuses on long-term value creation.

This marks the first large-scale shareholder entity to publicly back Musk's compensation package, which was detailed by Tesla and its Board of Directors earlier this month. The SBA's perspective is rooted in Musk's decade-long track record of driving company growth, increasing shareholder value, and achieving ambitious goals.

Contrasting Views from Proxy Firms

The SBA's positive stance sharply contrasts with the recommendations from Institutional Shareholder Services (ISS) and Glass Lewis, two prominent proxy advisory firms. Both firms have advised their clients to vote against Musk's compensation package. Musk himself has been vocal in his criticism of these firms, referring to them as "corporate terrorists" during a recent Q3 Earnings Call. He expressed concern that their recommendations could undermine his ability to lead the company, particularly in developing ambitious projects like the robot army.

Reasons for SBA's Support

The SBA outlined nine key reasons for supporting Musk's compensation plan:

• Pure Pay for Performance Design: Entirely performance-based and aligned with shareholders.

• Size of the Award and Share Count: Performance-based allocation with dilution tied to value creation and a structured milestone design.

• Market Capitalization Milestones: Clear, tiered targets with sustained performance requirements and a focus on shareholder value.

• Operational/Product Milestones: Clear, quantifiable goals with strategic product focus, financial discipline, and multi-quarter evaluation windows.

• Vesting/Holding Periods: Long-term vesting structure, mandatory holding period, and continuous service requirement.

• CEO Succession: Includes a succession planning requirement and a performance integrity safeguard.

• Time Horizon and Duration: An extended performance window of 10 years with no intermediate vesting.

• Dilution & Voting Power Implications: Potential for significant ownership increase and permanent dilution.

• Ambition and Stretch Goals: Reflects an extraordinary scale of growth and a focus on shareholder value.

Upcoming Shareholder Vote

Tesla shareholders are scheduled to vote on Elon Musk's compensation package on November 6 at the company's annual Shareholder Meeting. The outcome of this vote will be closely watched, given the significant financial implications and the differing opinions from key stakeholders.