Proxy advisory firm Institutional Shareholder Services (ISS) has advised Tesla investors to vote against a new $1 trillion pay package for Chief Executive Elon Musk and against Tesla making a potential investment in xAI, his AI startup.
The Wall Street Journal reports that in a report released on Friday, ISS expressed concerns about the magnitude and design of Elon Musk’s proposed “astronomical” stock award, despite the fact that Musk would only receive the payouts if he creates enormous value for Tesla shareholders. The proxy firm also recommended that shareholders vote against a nonbinding proposal asking Tesla’s board to invest in xAI, Musk’s AI venture that merged with his social media company X in March.
Breitbart News reported on Musk’s potential $1 trillion pay package last month:
According to the terms detailed in Tesla’s proxy filing on Friday, the plan spans 10 years and requires Musk to significantly expand Tesla’s nascent robotaxi business and grow the company’s market value to at least $8.5 trillion from its current valuation of about $1.1 trillion. If Musk hits all the performance targets, the additional shares he would receive could push his holdings in Tesla to at least 25 percent, aligning with his publicly stated desire to attain a stake of that size.
Tesla’s board has argued that the record-setting pay package, which consists of a series of stock awards tied to ambitious targets, is necessary to keep Musk’s attention on the EV maker as it expands into robotics and AI. However, ISS typically influences how index funds vote, and this is not the first time they have opposed Musk’s pay packages.
Musk has stated that he does not want to build AI inside of Tesla unless he has 25 percent voting power, which he believes is necessary to protect Tesla’s technology from bad actors and activist investors. The proposed pay package would give Musk an additional 12 percent stake in Tesla if the company reaches a market value of $8.5 trillion, several times its current valuation. At that level, the award would be valued at slightly more than $1 trillion.
Last year, both ISS and Glass Lewis advised investors against voting for a different board proposal to ratify Musk’s 2018 pay package, which had been struck down by a Delaware judge in early 2024. The measure ultimately passed with 72 percent of votes in favor, excluding shares held by Musk and his brother Kimbal, a Tesla board member. The company is now awaiting a decision on an appeal in Delaware’s Supreme Court to reinstate the 2018 package. If the appeal is unsuccessful, Tesla will issue Musk 96 million restricted shares of stock, worth approximately $42 billion at the current share price.
In addition to recommending against the new pay package and xAI investment, ISS also advised against re-electing longtime Tesla board member Ira Ehrenpreis, while supporting the re-election of board members Joe Gebbia and Kathleen Wilson-Thompson.
Tesla responded to the ISS report in a post on X, stating that “ISS once again completely misses fundamental points of investing and governance” and described the recommendation against Ehrenpreis as “unfounded and nonsensical.”
Read more at the Wall Street Journal here.
Lucas Nolan is a reporter for Breitbart News covering issues of free speech and online censorship.
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