ISS Recommends Tesla Investors Oppose Elon Musk’s $1 Trillion Pay Plan
Leading proxy advisory firm Institutional Shareholder Services (ISS) has advised Tesla shareholders to reject CEO Elon Musk’s proposed compensation plan, which could grant him nearly $1 trillion more in stock awards. The recommendation comes ahead of Tesla’s annual shareholder meeting scheduled for November 5, 2025. The proposed “mega performance equity award” is designed to incentivize Musk’s long-term leadership by linking stock grants to ambitious performance goals. While ISS acknowledges the potential to generate significant shareholder value if targets are met, it expressed serious concerns about the award’s unprecedented size and structure.“The astronomical grant value is conditioned upon far-reaching performance targets that, if achieved, would create enormous value for shareholders,” ISS wrote. However, the advisory firm highlighted “unmitigated concerns surrounding the special award’s magnitude and design.”Tesla Pushes Back Against ISS Criticism
Tesla publicly disagreed with ISS’s recommendation. In a post on X, the social media platform owned by Musk, the company accused ISS of overlooking fundamental principles of investing and corporate governance. Tesla noted that ISS had previously opposed compensation packages that shareholders had approved twice before and that Musk had already earned. The automaker emphasized that Musk’s current 2025 CEO Performance Award requires shareholders to “win big” before Musk receives any payout. Tesla urged investors to follow the board’s guidance and support all proposals in the upcoming proxy vote.Historical Context: Legal Challenges to Musk’s Pay
This is not the first time Musk’s compensation has faced shareholder and legal scrutiny. ISS had previously recommended against ratifying Musk’s 2018 CEO pay package, which was valued at approximately $56 billion at the time. In early 2024, the Delaware Court of Chancery ruled that the 2018 plan was improperly granted, ordering it to be rescinded. The court found that Tesla’s board had withheld vital information from shareholders ahead of the vote and that Musk exercised undue control over the board. Musk has appealed this ruling to the Delaware Supreme Court, with oral arguments held recently before a panel of judges.Voting Power and Proxy Advisory Influence
Musk controls at least 13.5% of Tesla’s voting shares, giving him substantial influence over the outcome of the pay package vote. This stake alone could secure approval despite ISS’s opposition. ISS, along with other proxy advisors like Glass Lewis, plays a significant role in shaping shareholder decisions at annual meetings, especially among passive and index fund investors. Musk has criticized these firms for their outsized influence on stock markets and governance matters.Other ISS Recommendations for Tesla Shareholders
- ISS recommends voting against Tesla’s board authorization to invest in xAI, Musk’s AI startup launched publicly in 2023.
- ISS advises shareholders to oppose the reinstatement of Ira Ehrenpreis to Tesla’s board, citing governance concerns.
FinOracleAI — Market View
ISS’s strong opposition to Elon Musk’s $1 trillion pay proposal underscores ongoing tensions between shareholder advisory firms and Tesla’s leadership. The scale and conditions of the award are unprecedented, raising questions about governance and long-term shareholder value.- Opportunities: Potential alignment of CEO incentives with aggressive growth targets could drive innovation and market leadership.
- Risks: The sheer size of the award may dilute shareholder value and set a controversial precedent for executive compensation.
- Legal uncertainties remain due to ongoing appeals related to Musk’s prior pay packages.
- Proxy advisory influence continues to shape shareholder voting, but Musk’s significant voting power could override opposition.
- Investments in xAI and governance changes may face increased scrutiny from shareholders and advisors.
Impact: The outcome of the November vote will be a critical indicator of shareholder tolerance for expansive CEO compensation and governance practices at Tesla. While Musk’s voting power is substantial, persistent advisory opposition and legal challenges add complexity to the company’s leadership dynamics.
