Tesla Motors $TSLA – Proxy Score 33

Tesla Motors (TSLA) is one of the stocks in my portfolio. Their annual meeting is coming up on 6/4/2013. ProxyDemocracy.org had collected the votes of two funds when I checked on 5/26/2013.  I voted with management 33% of the time.  View Proxy Statement.

 Warning: Be sure to vote each item on the proxy. Any items left blank are voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime)  I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions if warranted. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay), aggregate compensation by public companies to NEOs increased from 5 percent of earnings in 1993-1995 to about 10 percent in 2001-2003.

Few firms admit to having average executives. They generally set compensation at above average for their “peer group,” which is often chosen aspirationally. While the “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average,” it doesn’t work well for society to have all CEOs considered above average, with their collective pay spiraling out of control. We need to slow the pace of money going to the 1% if our economy is not to become third world. The rationale for peer group benchmarking is a mythological market for CEOs.

Tesla’s Summary Compensation Table shows Elon Musk, CEO and Chair, was the highest paid named executive officer (NEO) at about $78M in 2012. I’m using Yahoo! Finance to determine market cap ($10.7B) and Wikipedia’s rule of thumb regarding classification. CTSH is a large-cap company. According to the United States Proxy Exchange (USPX) guidelines (pages 9 & 10), using data from Equilar, the median CEO compensation at large-cap corporations was $10.8 million in 2010.

I don’t care if he’s god, $78M is too much, way above median when we factor inflation.  Unfortunately, we’re given no opportunity to vote against the pay package. There are many  governance issues at Tesla. Rather than spend hours analyzing them, I simply voted with CalSTRS, hoping they did their homework and that I’ll be driving down to a future meeting in a Model X.

How I voted (CorpGov) below:

 

# PROPOSAL TEXT CorpGov CalSTRS Calvert
1.1 Elect Director Brad W. Buss Withhold Withhold Withhold
1.2 Elect Director Ira Ehrenpreis Withhold Withhold Withhold
2 Ratify Auditors For For For

Mark your calendar:

Stockholders may present proper proposals for inclusion in Tesla’s proxy statement and for consideration at the next annual meeting of stockholders by submitting their proposals in writing to Tesla’s Corporate Secretary in a timely manner. In order to be included in the proxy statement for the 2014 annual meeting of stockholders, stockholder proposals must be received by Tesla’s Corporate Secretary no later than December 18, 2013, and must otherwise comply with the requirements of Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

  Looking at SharkRepellent.net, Tesla has a classified board and plurality voting. No action can be taken by written consent, nor can special meetings be called. They also have a supermajority vote requirement (66.67%) to amend certain charter and bylaw provisions.

Tesla Motors, Inc.’s ISS Governance QuickScore as of May 1, 2013 is 6. The pillar scores are Audit: 1; Board: 8; Shareholder Rights: 7; Compensation: 4. Brought to you by Institutional Shareholder Services (ISS). Scores range from “1” (low governance risk) to “10” (higher governance risk). Each of the pillar scores for Audit, Board, Shareholder Rights and Compensation, are based on specific company disclosure.

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