Top adviser recommends against Elon Musk’s $56B Tesla pay package

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Top proxy adviser Institutional Shareholder Services on Friday recommended Tesla shareholders vote against the reapproval of CEO Elon Musk’s $56 billion pay package and withhold their support from the re-election of News Corp. scion James Murdoch to the automaker’s board.

Tesla’s shareholder meeting is on June 13.

The report, a copy of which was obtained by CNBC, comes after the other influential proxy adviser service, Glass Lewis, also recommended shareholders vote against Musk’s pay package. Tesla’s board is seeking shareholder approval to reinstate Musk’s pay after a Delaware court voided the package earlier this year.

ISS said “cautionary” shareholder support was merited for Tesla’s plans to reincorporate out of Delaware and into Texas, although the proxy adviser also warned that there are concerns over how Tesla’s board decided to reincorporate and over the “unknown” nature of Texas’s business law framework.

The proxy adviser recommended support for some shareholder proposals that Tesla management opposes, including one that would declassify Tesla’s board. A classified or staggered board is considered by some advisers to be an effective defense against a takeover bid.

“At a mega-cap company like Tesla, what is perhaps even more relevant to shareholders is that a staggered board can hinder shareholders from holding directors accountable for poor responsiveness,” ISS said of its support for the declassification proposal.

Tesla has been courting shareholder support in both time-tested and novel ways. The company engaged communications firm FGS Global and proxy solicitor Innisfree M&A to win votes, and has bolstered apparent grassroots support from its large network of social-media influencers. The company also launched a website,, and has offered shareholders the chance to win a tour of Tesla’s Gigafactory facility in Austin.

Tesla seeks shareholder approval for Musk’s payday and concurrently to reincorporate out of Delaware and into Texas. The company has characterized the Delaware chancery court ruling that overturned Musk’s stock package as unfriendly to shareholders, noting the value that Musk has created for investors.

“Over the last several years it has become clear that Delaware is no longer the right jurisdiction for us,” Tesla chair Robyn Denholm said in a letter to shareholders earlier this week.

Tesla has adopted tactics other companies have used in contested shareholder meetings, whipping votes and launching a concerted public-relations effort to win support. While Tesla is not facing any sort of meaningful organized opposition to its efforts to reincorporate or re-approve Elon’s pay package, some shareholders have come out against it. Billionaire Leo KoGuan has repeatedly said he will vote against the package. KoGuan says he owns around 0.75% of Tesla shares, worth around $4.9 billion.

ISS and its smaller peer Glass Lewis are an important factor in how shareholders decide to cast their votes at annual elections. Their recommendations are closely watched in contested situations but are not definitive calls. Still, they have developed a reputation for being important bellwethers and seek to advocate for shareholders.

They’ve also been the direct target of Musk’s ire. Earlier this year on an earnings call, he compared ISS to the terrorist organization ISIL, also known as ISIS. Musk also said they “effectively control the stock market” on X in 2023, saying they had outsize influence over so-called “passive” or institutional shareholders.

Institutional shareholders like BlackRock and Vanguard, however, do not always vote with ISS recommendations. While voting decisions are generally not disclosed until well after a shareholder meeting, those institutional shareholders have due diligence teams that help them decide how to cast the millions of shares they manage on behalf of their investors.

ISS in its report said its prior concerns over the pay package, which dates back to 2018, had not been mitigated and that it “remains excessive,” noting that “the board has effectively only offered shareholders an ‘all or nothing’ option in this vote.”

The proxy adviser alluded to Musk’s myriad other business ventures such as social media platform X, his AI startup xAI and SpaceX, as another reason why Tesla shareholders should not support the pay package.

“The grant, in many ways, failed to achieve the board’s other original objectives of focusing CEO Musk on the interests of Tesla shareholders, as opposed to other business endeavors, and aligning his financial interests more closely with those of Tesla stockholders,” ISS said.

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