SpaceX and Tesla CEO Elon Musk attend the Viva Technology Conference held at the Porte de Versailles Exhibition Center in Paris on June 16, 2023.
Gonzalo Fuentes | Reuters
Top proxy advisor Institutional Shareholder Services is recommending Tesla investors vote against a pay plan that would increase CEO Elon Musk’s stake by nearly $1 trillion.
Musk’s “Mega Performance Equity Award” is aimed at retaining the CEO for the long term and has “an astronomical grant size contingent on a wide range of performance targets that, if achieved, would create significant value for shareholders,” ISS wrote on Friday.
Tesla’s 2025 annual shareholder meeting and proxy vote is scheduled for Nov. 5, and 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 regarding the size and content of special awards.”
If Musk’s plan is approved, it would be the largest award ever given to a CEO of a publicly traded company. If Tesla reaches a market capitalization of $8.5 trillion and meets other goals, Musk could acquire up to an additional 12% stake in Tesla.
Tesla did not agree with ISS’s recommendations.
In a post about Musk-owned Company X, the automaker accused ISS of missing “fundamental investment and governance points” and complained that its advisers had previously “recommended to deny the compensation that shareholders have voted on twice (and which Elon has already earned), as well as the 2025 CEO Performance Award (which Elon receives nothing unless shareholders win big).”
The company called on shareholders to vote in favor of the board’s recommendations on all 2025 proxy proposals.
ISS previously advised investors to refuse to “approve” Musk’s 2018 CEO compensation 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 was improperly approved by Tesla’s board of directors and should be revoked. The ruling alleged that Tesla hid important details from shareholders that they had a right to know before voting and that Mr. Musk controlled the company’s board of directors.
Musk has appealed the court’s decision to the Delaware Supreme Court, and a panel of judges heard opening arguments in the appeal this week.
An ISS representative declined to comment beyond the report.
ISS, like Glass Lewis and other companies in its industry, can influence whether shareholders vote in annual elections. In 2023, Musk accused ISS and Glass Lewis of effectively controlling the stock market, citing their influence over passive and index funds on some issues. He also baselessly compared the ISS to a terrorist organization.
Musk will be able to vote his stock in a vote on his future salary. He owns at least 13.5% of Tesla’s voting power, according to the latest available disclosures about his stock. These holdings alone could be enough to get approval for a nearly $1 trillion pay package.
In September, Musk increased his ownership in Tesla stock by purchasing another $1 billion worth of stock.
Among other ISS recommendations, the company suggested that shareholders should vote against giving Tesla’s board an investment in xAI, an AI company that Musk founded in March 2023 but only went public in July of the same year. Tesla sold tens of millions of dollars worth of Megapack battery energy storage systems to xAI.
ISS also recommended against a vote to reinstate Tesla board member Ira Ehrenpreis, a longtime close friend of Musk’s.
Tesla changed its corporate charter in May to limit the ability of shareholders to sue for breach of fiduciary duty, allowing only shareholders who own at least 3% of the company’s stock to bring so-called “derivative” lawsuits. Ehrenpreis was chairman of Tesla’s governance committee at the time the changes were made without a shareholder vote.
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