Tesla Shareholders Should Reject Musk's $1 Trillion Pay Package, ISS Advises

Tesla Inc. shareholders are being urged by proxy adviser Institutional Shareholder Services to vote against Chief Executive Officer Elon Musk’s $1 trillion compensation plan, adding a potential obstacle as the board works to rally investor support.

This marks the second year in a row that ISS urged shareholders to vote against a pay package for Musk.

“While it is recognized that the board seeks to retain Musk due to his track record and vision for Tesla’s future, and further that some shareholders may support this award in light of Musk’s successes in achieving growth of the company, there are unmitigated concerns surrounding the special award’s magnitude and design,” ISS wrote in the report.

The proxy firm’s recommendation was part of broader voting guidance it issued Friday.

In September, Tesla’s board proposed the long-awaited and unprecedented compensation package, designed to incentivize Musk to remain engaged with Tesla over the next decade. To unlock the full payout and additional voting control, Musk will need to reach a number of ambitious goals, including growing the company’s market value to at least $8.5 trillion and expanding its car, robotics and robotaxi businesses.

The additional shares Musk could receive would push his holdings in the electric-vehicle maker to at least 25%, according to the terms detailed in a proxy filing.

Musk has threatened to build products outside of Tesla if he can’t increase his equity holdings in the company, a key element of the latest compensation plan. While he remains Tesla’s largest shareholder, he sold a significant portion of his stock to fund his acquisition of Twitter. The social-media platform, which he renamed X, was acquired by Musk’s xAI earlier this year.

Shareholders will vote on the package at Tesla’s annual shareholders meeting, set for Nov. 6.

ISS and other proxy firms often have sway over shareholders, and particularly large institutions that hold stock in passive funds. But ISS and fellow proxy firm Glass Lewis both recommended shareholders reject Musk’s 2018 pay deal, and about three-quarters of investors still supported the package.