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This new letter from Chair Robyn Denholm sets the record straight on ISSโs and Glass Lewisโs recommendations, including why their one-size-fits-all policies donโt work for a company as uniquely ambitious as Tesla or its shareholders.
ISS and Glass Lewis have time and time again recommended against Teslaโs proposals designed to promote the sort of extraordinary growth we have enjoyed, and time and time again they have been proven wrong by both our shareholdersโ votes and Teslaโs results. Teslaโs market capitalization is up 20x since shareholders approved the 2018 CEO Performance Award โ which, it so happens, ISS and Glass Lewis opposed.
We encourage you โ the owners of this company โ to make an informed, independent vote ahead of the 2025 Annual Meeting. Vote yes to robots, and reject robotic voting. Vote with Tesla on ALL proposals.
โโโ
Dear Fellow Shareholders,
Following recent misguided recommendations from ISS and Glass Lewis regarding Proposals 1, 3 and 4, I want to set the record straight on the reelection of our directors and Elonโs equity incentives.
At Tesla, we would rather design visionary systems than be constrained by whatโs conventional. We are not afraid to break the mold and we build things the right way. In contrast, ISS and Glass Lewis evaluate all companies and all proposals using the same simplistic, one-size-fits-all framework.
They are fundamentally unable to evaluate companies, like Tesla, that chart their own course and challenge the status quo. Thankfully our shareholders have ignored their recommendations โ otherwise, you may have missed out on our market capitalization soaring 20x while the proxy advisors time and time again recommended โagainstโ Tesla proposals designed to promote the sort of extraordinary growth we have enjoyed.
I encourage you to ignore ISSโs and Glass Lewisโs advice for this yearโs Annual Meeting and vote with the Boardโs recommendations on all proposals. Let me address some of the key misconceptions reflected in ISSโs and Glass Lewisโs recommendations.
But youโre giving him too much money!
Elon gets nothing unless shareholders enjoy exceptional investment returns. The 2025 CEO Performance Award was designed with one overarching purpose: to supercharge Teslaโs next phase of exceptional growth, innovation and value creation.
There are no layups, and Elon only gets additional voting rights if he delivers on bold market capitalization and operational goals. Furthermore, he only gets to keep those voting rights and obtain the associated economic benefits if he leads Tesla for at least 7.5 more years.
This plan delivers enormous upside to shareholders, who will receive approximately nine-tenths of the value created. To put it into perspective, even if Elon only hits the first milestone, he will be delivering approximately a trillion dollars of sustained value to shareholders, almost doubling our current market capitalization, far exceeding any payout to Elon for achieving that tranche.
In other words: this performance incentive award is generally contingent on delivering products that support Elonโs vision for Sustainable Abundance, addresses shareholder concerns regarding retention and long-term succession, and ultimately creates extraordinary shareholder value. There is no guaranteed pay because we believe the key to Teslaโs long-term success lies in ensuring alignment of our CEOโs interests with those of our shareholders.
But youโre going to cause too much dilution!
Shareholders should consider this award to be an investment; not dilution. If the full 2025 CEO Performance Award vests at the highest market capitalization milestone, Teslaโs market capitalization would experience a 7.5x increase in value in exchange for 13.12% dilution by the proxy advisorsโ highest estimate.
The proxy advisorsโ preoccupation with dilution misses the point that the pie must increase by more than seven-fold to get there. In contrast to ISSโs and Glass Lewisโs rigid views of the world โ which sees shareholders as โgiving away valueโ โ those of us on the Board believe in a reality where every shareholder gets a bigger slice of the growing pie. While I donโt agree with many statements in the proxy advisorsโ reports, I agree with ISSโs acknowledgement that our 2025 CEO Performance Award is designed so that โhistorical value would be realized not only for Musk, but also for the company's shareholders.โ
But the product goals are way too easy!
There are no โeasyโ milestones under the 2025 CEO Performance Award. To achieve the final Adjusted EBITDA milestone, Elon will need to lead Tesla to $400 billion in Adjusted EBITDA โ which means growing our current Adjusted EBITDA by ~26x.
This award aims to see Tesla grow larger than any company in history. Each and every operational milestone, including the product goals, must be validated by an extraordinarily ambitious โ and sustained โ increase in market capitalization. Market capitalization โ the marketโs verdict on real value โ canโt be โgamedโ through aggressive pricing or other tactics to create illusory growth; Teslaโs market capitalization targets require profitable, real-world products.
If Elon doesnโt deliver sustained increases in market capitalization to validate the success of any product goal, he will earn nothing under such product goal.
You didnโt need to do this to keep Elon. What he really wants is votes!
The 2025 CEO Performance Award channels Elonโs desire for a stable ownership structure to promote extraordinary growth into what shareholders actually care about: sustained, long-term value creation.
While the Special Committee evaluated designing a high-vote structure, it wasnโt feasible under current rules. Instead, the 2025 CEO Performance Award improves upon the wildly successful 2018 CEO Performance Award by separating voting power from economic value to strengthen alignment among Elon, Tesla and shareholders and promotes longer term retention by delaying vesting of any earned share for at least 7.5 years.
Voting rights on a tranche are only earned after shareholders win โ and win big.
But your governance for compensation is flawed!
The disinterested Special Committee undertook a seven-month long process to design and negotiate the 2025 CEO Performance Award and Special Share Reserve under the A&R 2019 Equity Incentive Plan. Most importantly, even following that rigorous process shareholders still have the final say.
Governance is not an end in and of itself, but a necessary ingredient for durable, long-term value creation. We judge governance by results, and Teslaโs stock has delivered annualized returns of almost 50% since the beginning of 2018, far outpacing the broader market.
While ISS and Glass Lewis would prefer that we follow the herd and apply their cookie-cutter guidelines, it is precisely Teslaโs ability to lead, innovate and think independently that has enabled such extraordinary shareholder returns.
And your directors are bad at governance!
Our longest standing independent director, Ira, is uniquely qualified to serve on our board and lead our governance efforts, having received numerous awards in the corporate governance and growth company spaces. While Ira has been guiding our governance and compensation, total shareholder returns have topped 39,000%.
As Tesla continues to grow shareholder value through technological progress, Kathleenโs decades of legal and operating experience and compensation, human capital and management knowledge will be crucial for Tesla to win the AI talent war.
To be a great director at Tesla, thereโs no question that you must have thick skin. As a trailblazing company willing to break the mold in pursuit of an extraordinary future, itโs no surprise that our directors are easy targets. Despite this, our directors have consistently demonstrated their integrity and risen above the criticisms of those too narrow-minded to appreciate our ambitious vision.
The fact is both Ira and Kathleen are widely recognized as corporate governance leaders because they remain passionately focused on our mission to create Sustainable Abundance for all. They have the fortitude to do the right thing โ which is often the hard thing โ by prioritizing shareholdersโ long-term interests rather than caving to short-term desires in support of the whims of critics.
Tesla designs and builds robots, but we donโt let robots design our governance structure as ISS and Glass Lewis would prefer. That is why we have assembled a Board with a wide array of perspectives, from people with varied experiences. In contrast to the formulaic approach reflected in ISSโs and Glass Lewisโs recommendations on our directors and Proposals 3 and 4, we on the Tesla Board donโt see governance as a one-size-fits-all exercise.
We view governance as a dynamic process, where we act with transparency and integrity as all of our directors work together to deliver financial value to our shareholders. The way we practice governance demands bold, deliberative and thought-provoking leadership as we face new challenges, navigate new paths, and ultimately drive Tesla into an exciting future with Sustainable Abundance for all. Our more thoughtful governance process requires dedication and contributions from incredible directors like Ira, Kathleen and Joe.
So, in evaluating these recommendations from ISS and Glass Lewis, as well as any third-party advice regarding your vote at this yearโs Annual Meeting, we encourage you โ shareholders who have made an actual financial investment in Teslaโs future โ to make your own decision rather than following proxy advisors who donโt own a single share of Tesla stock.
I think it is noteworthy that ISS and Glass Lewis have both announced plans to update their product offerings, with Glass Lewis admitting that โthe traditional one-size-fits-all model of proxy advice no longer meets the needs of a diverse client base.โ So, their models are changing, just not today, and not for our Annual Meeting. Well, at Tesla, we know that progress waits for no one and speed is crucial to success.
While the proxy advisors tinker with their models, I urge you to take back your vote.
If you prefer that Tesla turn into just another car company mired in the ways of the past, then you should follow ISS and Glass Lewis. If you believe that Tesla, under the visionary leadership of Elon and the oversight of a Board that includes business leaders with integrity like Ira, Kathleen and Joe, then you should vote with Tesla.
Thank you for your continued support of Tesla.
Very truly yours,
Robyn Denholm
Chairperson of the Board
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