Elon Musk, CEO of SpaceX and Tesla, attends the Viva Technology conference on 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 will 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 corporate 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, could be the most important ever awarded to a public company CEO. It could could net Musk as much as a further 12% stake in Tesla, should the corporate 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 “really useful against compensation that shareholders have voted on twice before (and that Elon has already earned), in addition to the 2025 CEO Performance Award (where Elon receives nothing unless shareholders win big).”
The corporate 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 value an estimated $56 billion on the time.
The Delaware Court of Chancery ruled early last yr that the 2018 pay plan had been improperly granted by the Tesla board and have to be rescinded.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 within the appeal heard by a panel of judges this week.
Representatives for ISS declined to comment beyond the report.
ISS, together with Glass Lewis and smaller peers, can influence how shareholders determine to solid their votes at annual elections. Musk accused ISS and Glass Lewis in 2023 of effectively controlling the stock market due to their influence with passive or index funds in some matters. He also baselessly compared ISS to a terrorist organization.
Musk will have the ability to vote his own shares within the vote concerning his future pay. He holds at the very least 13.5% of Tesla’s voting power, based on essentially the most recent available disclosures on his stake. Those holdings alone could possibly be enough to secure approval for the nearly $1 trillion pay package.
In September, Musk added to his ownership of Tesla stock buying one other $1 billion value of shares.
Amongst other ISS recommendations, the firm also suggested that shareholders should vote against giving Tesla’s board authorization to speculate in xAI, the AI company that Musk began in March 2023 but only disclosed publicly in July that yr. Tesla has sold tens of tens of millions of dollars value of its Megapack battery energy storage systems to xAI.
ISS also really useful against voting to reinstate Tesla board member Ira Ehrenpreis, a longstanding and shut friend of Musk.
In May, Tesla modified its corporate bylaws to limit shareholders’ ability to sue for a breach of fiduciary duties in order that only a shareholder that owns at the very least 3% of the corporate’s stock can bring what’s called a “derivative” motion. Ehrenpreis presided over Tesla’s governance committee on the time that change was made with no shareholder vote.
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