CalSTRS Not on Board with Tesla’s Proposed Compensation Package

Cites issues with ‘lack of focus on profitability for the company.’

Although it remains to be seen what Tesla shareowners think of CEO Elon Musk’s compensation package, the $224 billion California State Teachers’ Retirement System (CalSTRS) is not a fan of the move.

“CalSTRS is appreciative of Elon Musk’s visionary leadership of Tesla and hopes he continues to advance the company’s mission to accelerate the world’s transition to sustainable energy. While we appreciate that the board of Tesla is trying to incentivize and further align Mr. Musk with that of shareholders, we cannot support the 2018 performance award,” ,” CalSTRS’s Director of Corporate Governance Anne Sheehan told CIO in an emailed statement. “Given the size of the award, we believe the potential dilution to shareholders is just too great. In addition, we have concerns about the lack of focus on profitability for the company, and the one profitability metric that is used excludes the cost of stock-based compensation.” 

Announced in January, Musk’s proposal plans to reward Tesla employees with rewards based on the car company’s long-term market value rather than salary or cash bonuses. He expects Tesla’s market value to rise to $650 billion over the next 10 years.

Should Musk’s calculations be on par, Reuters reports that he could own as much as $55.8 billion in the company’s stock and more than a quarter of the company by 2028.

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The fate of the proposal will be decided via proxy vote by shareowners at Tesla’s Wednesday meeting. Proxy advisory firm Institutional Shareholder Services suggested shareholders reject the proposal as the firm felt the award was too great.

With approximately 258,084 shares of Tesla valued at $80,147,986, CalSTRS currently holds a 0.13% stake in the company and is the electric carmaker’s 59th-largest investor.

Tesla could not be reached for comment.

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