Tesla (NASDAQ:TSLA) defended CEO Elon Musk's $56 billion pay package on Monday, arguing that a new compensation plan would be even more costly, days after a proxy advisory firm, Institutional Shareholder Services (ISS), recommended that shareholders vote against the proposal.
The electric vehicle maker (EV) stated that Musk's compensation—one of the largest in corporate America—motivated him to generate "tremendous value" for shareholders.
The response follows ISS's criticism last week, which labeled the pay package as "excessive" and expressed concerns about Tesla presenting shareholders with an "all or nothing" option ahead of the vote at their annual meeting on June 13.
Initially set and approved by shareholders in 2018, the compensation plan rewards Musk based on Tesla's market value and operational milestones. However, a Delaware judge voided the package in January, prompting Tesla to seek incorporation in Texas.
In its Monday filing, Tesla contended that ISS's recommendation stemmed from a "technical misunderstanding" and noted that the advisory firm acknowledged the company's strong performance under Musk.
According to Tesla, Delaware law requires that the proposal be either fully accepted or rejected, and any new pay package would be more expensive for shareholders.
"A functionally equivalent grant of new options could result in an accounting charge of more than $25 billion, compared to the $2.3 billion charge originally recognized for the 2018 award," the company said.
"A deal should be a deal. He delivered on his end of the bargain. It's time for us to deliver on ours."