June 3 (Reuters) - Tesla on Monday defended a

proposal to ratify CEO Elon Musk's $56 billion pay package and

said a new compensation would be costlier, days after a top

proxy advisory firm recommended shareholders to vote against the

proposal.

The electric-vehicle maker argued that his pay package - one

of the biggest in corporate America - motivated Musk to create

"tremendous value" for shareholders.

This was in response to Institutional Shareholder

Services (ISS) last week calling the pay "excessive", while

raising concern over Tesla offering its shareholders an "all or

nothing" option ahead of a vote at their annual meeting on June

13.

The compensation, set and approved in 2018 by shareholders,

rewards based on Tesla's market value and operational

milestones.

But a Delaware judge voided it in January, and Tesla has

since then sought to move its state of incorporation to Texas.

The company said in its Monday filing that shareholder

recommendation by ISS is based on a "technical misunderstanding"

and that the advisory firm recognized the company's strong

performance under Musk.

Under Delaware law, ratification means that the proposal is

either accepted or rejected in its entirety, Tesla said, adding

that a new pay package would be costlier to the 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," it said.

"A deal should be a deal. He delivered on his end of the

bargain. It's time for us to deliver on ours."