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
Top proxy advisor Institutional Shareholder Services is recommending that Tesla investors vote against a pay plan for CEO Elon Musk that would grant him nearly $1 trillion more in stock.
The “mega performance equity award” to Musk, designed to retain the CEO long-term, “has an astronomical grant value conditioned upon far-reaching performance targets that, if achieved, would create enormous value for shareholders,” ISS wrote on Friday.
Tesla’s 2025 annual shareholder meeting and proxy vote is scheduled for Nov. 5. The company is scheduled to report third-quarter results on Wednesday.
ISS said that while some shareholders may support the pay plan, “there are unmitigated concerns surrounding the special award’s magnitude and design.”
Musk’s plan, if approved, would be the largest ever awarded to a public company CEO. It could could net Musk up to an additional 12% stake in Tesla, should the company hit a market cap of $8.5 trillion and achieve other goals.
Tesla disagreed with the ISS recommendations.
In a post on X, which is owned by Musk, the automaker accused ISS of missing “fundamental points of investing and governance,” and complained that the advisors had previously “recommended against compensation that shareholders have voted on twice before (and that Elon has already earned), as well as the 2025 CEO Performance Award (where Elon receives nothing unless shareholders win big).”
The company urged shareholders to vote with the board’s recommendations on all proposals on the 2025 proxy.
ISS previously advised investors to reject a “ratification” of Musk’s 2018 CEO pay package, which was worth an estimated $56 billion at the time.
The Delaware Court of Chancery ruled early last year that the 2018 pay plan had been improperly granted by the Tesla board and must be rescinded. The ruling said Tesla hid crucial details from shareholders that they were entitled to before voting, and that Musk had controlled the board.
Musk has 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.
Representatives for ISS declined to comment beyond the report.
ISS, along with Glass Lewis and smaller peers, can influence how shareholders decide to cast their votes at annual elections. Musk accused ISS and Glass Lewis in 2023 of effectively controlling the stock market because of their influence with passive or index funds in some matters. He also baselessly compared ISS to a terrorist organization.
Musk will be able to vote his own shares in the vote concerning his future pay. He holds at least 13.5% of Tesla’s voting power, according to the most recent available disclosures on his stake. Those holdings alone could be enough to secure approval for the nearly $1 trillion pay package.
In September, Musk added to his ownership of Tesla stock buying another $1 billion worth of shares.
Among other ISS recommendations, the firm also suggested that shareholders should vote against giving Tesla’s board authorization to invest in xAI, the AI company that Musk started in March 2023 but only disclosed publicly in July that year. Tesla has sold tens of millions of dollars worth of its Megapack battery energy storage systems to xAI.
ISS also recommended against voting to reinstate Tesla board member Ira Ehrenpreis, a longstanding and close friend of Musk.
In May, Tesla changed its corporate bylaws to limit shareholders’ ability to sue for a breach of fiduciary duties so that only a shareholder that owns at least 3% of the company’s stock can bring what’s called a “derivative” action. Ehrenpreis presided over Tesla’s governance committee at the time that change was made without a shareholder vote.
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