Elon Musk, CEO of SpaceX and Tesla, attends the Viva Technology conference at the Porte de Versailles exhibition center in Paris on June 16, 2023.
Gonzalo Fuentes | Reuters
Leading proxy advisor Institutional Shareholder Services is recommending Tesla investors vote against a CEO Elon Musk compensation plan that would give him nearly $1 trillion more in stock.
The “mega performance stock award” given to Musk, designed to retain the CEO for the long term, “has astronomical value conditioned on high-profile performance goals that, if achieved, would create enormous value for shareholders,” ISS wrote Friday.
Tesla’s annual shareholder meeting and proxy voting for 2025 are scheduled for November 5. The company is expected to report third-quarter results on Wednesday.
ISS said that while some shareholders may support the compensation plan, “there are unmitigated concerns regarding the size and design of the special reward.”
Musk’s plan, if approved, would be the largest ever awarded to a public company CEO. This could net Musk up to an additional 12% in Tesla, should the company reach a market cap of $8.5 trillion and achieve other goals.
Tesla disagreed with the ISS’s recommendations.
In an article on Musk-owned receives nothing unless the shareholders win big.”
The company urged shareholders to vote with the board’s recommendations on all proposals regarding the 2025 proxy.
ISS previously advised investors to reject a “ratification” of Elon Musk’s CEO compensation package for 2018, which was then estimated to be worth $56 billion.
The Delaware Court of Chancery ruled early last year that the compensation plan for 2018 was improperly granted by Tesla’s board of directors and must be rescinded. The ruling says Tesla hid crucial details they were entitled to from shareholders before voting and that Musk had controlled the board.
Musk appealed that court’s decision to the Delaware State Supreme Court, with opening arguments in the appeal heard by a panel of judges this week.
ISS representatives declined to comment beyond the report.
ISS, alongside Glass Lewis and its smaller peers, can influence how shareholders decide to vote in annual elections. Musk accused ISS and Glass Lewis in 2023 of effectively controlling the stock market due to their influence on passive or index funds in certain areas. He also baselessly compared the ISS to a terrorist organization.
Musk will be able to vote his own shares in the vote regarding his future salary. He holds at least 13.5% of Tesla’s voting rights, according to the latest information available on his stake. These holdings alone could be enough to win approval for a nearly $1 trillion wage package.
In September, Musk increased his stake in Tesla stock by purchasing an additional $1 billion in stock.
Among other ISS recommendations, the company also suggested that shareholders vote against allowing Tesla’s board to invest in xAI, the AI ​​company that Musk launched in March 2023 but which was not publicly disclosed until July of that year. Tesla sold tens of millions of dollars worth of its Megapack battery energy storage systems to xAI.
The ISS also recommended against voting to reinstate Tesla board member Ira Ehrenpreis, a close and longtime friend of Musk.
In May, Tesla amended its bylaws to limit shareholders’ ability to sue for breach of fiduciary duties, so that only a shareholder with at least 3% of the company’s stock can bring what’s called a “derivative” action. Ehrenpreis chaired Tesla’s governance committee at the time this change was made without a shareholder vote.
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