UPDATE: Tesla shareholders face a critical decision as the Institutional Shareholder Services (ISS) has just announced its recommendation to reject Elon Musk’s unprecedented $1.5 trillion compensation package. This urgent appeal comes as Tesla’s annual shareholders meeting approaches on November 6, 2023, adding pressure on the board to secure investor backing.
ISS’s recommendation marks the second consecutive year that the proxy adviser has urged shareholders to oppose Musk’s pay package. The firm expressed “unmitigated concerns” regarding the plan’s magnitude and design, highlighting the absence of specific requirements to ensure Musk prioritizes Tesla amid his commitments to multiple ventures, including SpaceX, xAI, Neuralink, and the Boring Company.
The proposed compensation package, unveiled in September, aims to incentivize Musk to drive Tesla’s growth over the next decade. To unlock the full payout, Musk must achieve ambitious goals, including elevating Tesla’s market value to at least $8.5 trillion and expanding its robotics and robotaxi businesses. The potential additional shares could elevate his stake in Tesla to a staggering 25 percent, as laid out in the proxy filing.
Musk has threatened to pursue ventures outside of Tesla if he cannot boost his equity holdings, emphasizing the importance of this new compensation plan. He remains Tesla’s largest shareholder, despite selling a significant portion of his stock to finance the acquisition of Twitter, now known as X, which was purchased by his company xAI earlier this year.
The ISS recommendation is particularly influential, swaying large institutional shareholders who often hold stock in passive funds. Notably, both ISS and fellow proxy firm Glass Lewis previously advised against Musk’s 2018 pay deal, yet approximately three-quarters of investors supported it. However, a Delaware judge overturned that plan in 2024, citing Musk’s undue influence over the process, which led to Tesla’s relocation to Texas.
In a developing situation, Tesla’s board granted Musk an interim award valued at around $30 billion in August, intended to replace the disputed payment partially. This interim award would be forfeited if Musk’s original pay package is reinstated.
The stakes are high as Tesla prepares to resume its legal battle to appeal the ruling, with the next court session scheduled for October 15 before the Delaware Supreme Court. Tesla’s board chair, Robyn Denholm, has publicly stated that no one but Musk can effectively lead the company.
ISS also advised against awarding Musk backpay from the 2018 plan and urged shareholders to reject a proposal for Tesla to invest in Musk’s artificial intelligence company, xAI. This proposal, deemed highly unusual, reportedly arose after Musk encouraged shareholders to submit suggestions on the topic.
As the meeting date approaches, Tesla has launched a promotional video on X to rally support for Musk’s pay proposal, reflecting the urgency and significance of this decision for shareholders and the future direction of the company.
Stay tuned as we continue to monitor this developing story and its implications for Tesla and its leadership under Elon Musk.
