Tesla’s $1T CEO pay plan faces fresh pushback from ISS

Tesla Inc. shareholders are being urged by proxy adviser Institutional Shareholder Services (ISS) to vote against Chief Executive Officer Elon Musk’s $1 trillion compensation plan, creating a potential hurdle as the board seeks investor backing.

This is the second consecutive year ISS has recommended that shareholders reject a pay package for Musk.

ISS flags concerns over Musk’s $1 trillion pay plan

Musk oversees an overlapping empire of five companies: Tesla, SpaceX, xAI, Neuralink, and the Boring Company. In its report, ISS highlighted concerns over the plan’s size and structure. 

In the report, which was part of broader voting guidance it issued Friday, the proxy adviser noted that while one of the main reasons for this award is to retain Musk and push him to invest time on Tesla instead of his other business ventures, there are no explicit requirements to ensure that this will be the case. The proxy firm cited “unmitigated concerns” with the plan’s magnitude and design.

The EV maker pushed back in a post on X, urging shareholders to vote in line with the company’s recommendations, arguing that ISS misunderstood key principles of investing and governance and that it was easy for the proxy adviser to make voting recommendations without having any stake in the outcome.

Tesla defends compensation package ahead of crucial shareholder vote

The pay package, announced in September, was designed to make Musk an integral part of Tesla for the next ten years. To gain access to the full payout and additional voting control, Musk also needs to meet certain ambitious targets, such as Tesla’s market value reaching as high as $8.5 trillion or the carmaker expanding its robotics and robotaxi business. The added shares would bring Musk’s ownership stake in Tesla to at least 25 percent, a proxy filing shows.

Musk has said he may consider products outside of the EV maker should he fail to increase his stake in the firm, a key part of the new proposal. Musk, who remains Tesla’s largest shareholder, sold a material amount of stock in the carmaker to fund his acquisition of Twitter — now known as X and owned by Musk’s company xAI.

Shareholders will vote on the package at Tesla’s annual meeting on Nov. 6. ISS and other proxy advisers often influence major institutional investors, especially those holding stock in passive funds. However, despite ISS and Glass Lewis recommending shareholders reject Musk’s 2018 pay deal, roughly three-quarters still supported it. In 2024, a Delaware judge struck down that plan, citing Musk’s undue influence over the board, prompting Tesla to later relocate its corporate home to Texas.

The current plan, fluctuating in value with Tesla’s stock and now worth more than $100 billion, was put to an advisory vote last year and approved. To partially replace the payment, Tesla’s board granted Musk an interim award in August valued at around $30 billion, which would be forfeited if the original pay package is reinstated. Musk and Tesla resumed their legal fight to appeal the ruling before the Delaware Supreme Court on Oct. 15.

Tesla board chair Robyn Denholm emphasized in September that no one but Musk can run the company. According to reporting from The Wall Street Journal, Robyn launched her pitch ahead of the November 6 shareholder vote, where Tesla is asking investors to approve a new $1 trillion compensation package for Elon.

The intention is to get him to stay locked in for another ten years, but the sales are down, investors are tired, and Tesla’s growth story looks shakier than ever.

Robyn, who’s chaired the EV maker’s board since 2018, has started doing interviews and meeting with big institutional shareholders. This is her second time doing this in under two years. She’s trying to push through a huge payday for Elon, again, with the not-so-subtle message that he could walk if he doesn’t get it.

ISS  recommended against awarding Musk backpay under the 2018 plan and urged shareholders to reject a proposal for Tesla to invest in Musk’s AI company, xAI, calling it “a highly unusual proposal both in terms of the request itself and the way it came to be on the ballot.”

Following ISS’s guidance, the electric car giant promoted a video on X to rally shareholder support for the pay plan.

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