Elon Musk Foils the Proxy Firms – WSJ

Votes by Tesla shareholders to reinstate Elon Musk s pay package and approve the company s reincorporation in Texas aren t only a victory for Mr. Musk over the Delaware judge who invalidated the CEO s compensation deal in January. They are also a stinging rebuke to the proxy advisory firm Glass Lewis and the left-wing agenda it pushes on public companies.

Proxy advisory firms have considerable influence over public companies. They advise institutional investors which formally own most shares in public companies on casting proxy votes concerning CEO pay, director elections and other important proposals. Two firms Glass Lewis and Institutional Shareholder Services dominate the business.

After Delaware Court of Chancery Chancellor Kathaleen McCormick threw out Mr. Musk s pay package, Glass Lewis and ISS opposed the company s plan to reinstate it. Glass Lewis also weighed in against Tesla s proposal to reincorporate in Texas.

Glass Lewis, which has approved other companies reincorporations, should have seen that Tesla had legitimate reasons for leaving Delaware. The trial lawyers who challenged Mr. Musk s 2018 compensation deal asked for $5 billion in fees an egregious example of the legal shenanigans that have become all too common in Delaware. Such developments have driven other public companies, including Tripadvisor, to reincorporate elsewhere.

Instead, the proxy advisory s hidebound opposition elicited a classic Musk response. In building Tesla, Mr. Musk skipped the traditional middlemen for selling cars franchised dealers and sold directly to consumers. To rebut Glass Lewis, Tesla similarly went straight to the audience that matters: its investors.

In a scathing point-by-point takedown, Tesla blasted the proxy adviser s recommendations as absurd and based on faulty logic, speculation, and scaremongering. Tesla s letter to shareholders noted that conspicuously absent from the Glass Lewis report is the over $735 billion in value that Mr. Musk created for shareholders. In a vote last week, Tesla investors sided with Mr. Musk over the proxy advisers by a wide margin.

via www.wsj.com

Magic of the market, baby.