Proxy Advisor Opposes Musk’s Compensation Package
Institutional Shareholder Services (ISS) has recommended that Tesla investors reject CEO Elon Musk’s proposed compensation package valued at approximately $1 trillion, according to reports. This marks the second consecutive year that the influential proxy advisory firm has urged shareholders to vote against a pay package for Musk, with the upcoming shareholder meeting scheduled for November 6.
The proxy firm cited “unmitigated concerns” with both the magnitude and design of the compensation plan in its voting guidance issued Friday. “Although one of the main reasons for this award is to retain Musk and keep his time and attention on Tesla instead of his other business ventures, there are no explicit requirements to ensure that this will be the case,” ISS wrote in its report.
Tesla’s Response to ISS Recommendations
Tesla responded strongly to the ISS recommendations, with the automaker stating that the proxy firm “once again completely misses fundamental points of investing and governance.” The company added, “It’s easy for ISS to tell others how to vote when they have nothing on the line,” according to sources familiar with the matter.
Following the ISS recommendations, Tesla reportedly promoted a video on X aimed at rallying shareholder support for the pay proposal. The social media campaign represents part of Tesla’s efforts to secure approval for the compensation package despite opposition from advisory firms.
Compensation Package Details and Requirements
The unprecedented compensation package, proposed by Tesla’s board in September, is designed to incentivize Musk to remain engaged with Tesla over the next decade, analysts suggest. To unlock the full payout and additional voting control, Musk would need to reach several 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 reportedly threatened to build products outside of Tesla if he can’t increase his equity holdings in the company, making this a key element of the latest compensation plan.
Historical Context and Legal Challenges
This isn’t the first time ISS has opposed Musk’s compensation. The proxy firm and fellow advisory firm Glass Lewis both recommended shareholders reject Musk’s 2018 pay deal, though about three-quarters of investors still supported the package. In 2024, a Delaware judge struck down that plan after finding Musk had undue influence over the process and the board had conflicts of interest.
Musk later cited the pay dispute as part of the reason why Tesla shifted its corporate home to Texas from Delaware. The legal battle continues, with Musk and Tesla reportedly resuming their fight to appeal the ruling before the Delaware Supreme Court on October 15.
Additional ISS Recommendations
ISS also recommended against awarding Musk backpay he would have received under the 2018 plan and urged shareholders to reject a proposal for Tesla to invest in Musk’s artificial intelligence company, xAI. “This is a highly unusual proposal both in terms of the request itself and the way it came to be on the ballot,” ISS wrote, noting that Musk had reportedly encouraged shareholders to submit proposals on this topic.
The proxy advisor’s influence extends beyond individual investors to large institutions that hold stock in passive funds, making their recommendations significant in proxy voting outcomes. However, historical precedent suggests that Tesla shareholders may still approve the package despite ISS opposition.
Broader Business Context
Musk oversees an overlapping empire of five companies: Tesla, SpaceX, xAI, Neuralink and the Boring Company. This distribution of attention has raised concerns among some investors about his focus on Tesla specifically. Tesla’s board chair Robyn Denholm insisted in a September interview that no one but Musk can run the company, according to reports.
The compensation package, which fluctuates in value based on the stock price and is currently worth more than $100 billion, was put to an advisory vote last year. Investors who ultimately approved the measure were asked to vote on the matter a second time at Tesla’s annual shareholders meeting to demonstrate their backing for the plan.
Tesla’s board granted Musk an interim award in August valued at about $30 billion designed to partially replace the payment, though this award would be forfeited if Musk’s original pay package is reinstated. The ongoing debate occurs amid broader industry developments in corporate governance and executive compensation standards across technology sectors.
The situation reflects evolving market trends in how companies structure compensation for visionary leaders while maintaining proper governance controls. As companies navigate these complex related innovations in executive pay structures, the Tesla case may set important precedents for how boards balance retention incentives with shareholder interests. These compensation discussions are occurring alongside other recent technology sector governance challenges that continue to evolve.
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