Tesla calls criticism of Elon Musk’s $1T pay proposal ‘misguided’
The world’s two largest independent advisory firms have both urged Tesla shareholders to reject the company’s proposed $1 trillion pay package for Elon Musk, drawing a rebuke from the EV automaker.
Institutional Shareholder Services (ISS) on Friday said that the "astronomical" pay package could end up rewarding only partial achievements of company goals, while causing potential dilution for existing investors, as Reuters reported.
Glass Lewis & Co., the other advisory firm, also warned of potential investor dilution in a report on Monday, and said that this and other terms of the deal “warrant significant concern,” according to Bloomberg.
Both ISS and Glass Lewis also recommended that Tesla shareholders reject Musk’s pay package in 2018, but three-quarters of investors ultimately approved the deal.
The two companies are “proxy advisory firms” that conduct research and analysis for proposals made by corporate entities and then issue recommendations to shareholders. Their recommendations can often carry significant influence especially in the way large institutional investors vote.
The latest compensation proposal for Musk — and the reason it can reach $1 trillion — is a 10-year plan centered around what the Tesla board calls a “pay for performance” construct, which would reward Musk for hitting specific milestones in the coming years.
The compensation plan is meant to incentivize Musk for maintaining his focus on Tesla — a focus that some shareholders feel has waned in recent years, given his work with his other companies and also his foray into politics.
Among the milestones that have been set include growing the company’s market cap to $8.5 trillion and expanding its car, robotaxi and robotics businesses. The company’s market value is currently $1.5 trillion.
‘Right leader at the right time’
In a video posted to Tesla’s X account on Friday, board director Kathleen Wilson-Thompson said that the pay for performance package was designed to “have direct alignment between Elon and the ultimate shareholders.”
Wilson-Thompson called Musk “a transformational leader” who is also “the right leader at the right time” for the company because he is a “talent magnet” who attracts highly skilled employees.
"Many people come to Tesla to specifically work with Elon, so we recognize that retaining and incentivizing him will, in the long run, help us retain and recruit better talent,” she said.
In a separate post on Monday, Tesla noted that both ISS and Glass Lewis had recommended against Musk’s pay package in the past, adding that it’s “a good thing our shareholders ignored those recommendations otherwise they may have missed out on our market capitalization soaring by 20x from March 2018 to August 2025.”
The company said that Glass Lewis’ report on Monday “has followed ISS and issued another misguided recommendation that again disregards the fundamental purpose of public companies and who they serve — the shareholders.”
Tesla added that Glass Lewis’ “one-size-fits-all checklists undermine shareholders’ interests, including by opposing proposals designed to build long-term value at Tesla.”
The plan spans the next 10 years and rewards Musk with additional voting shares by reaching the milestones set in it. His holdings in the company could reach 25% by meeting these goals.
Musk currently owns about 13.5% of the company. He was not allowed to vote on his pay package in 2018, but will be allowed to vote his shares this time.
His 13.5% stake could be enough to get it approved, as Reuters noted.
Tesla’s board is set to vote on the compensation plan at a shareholder meeting on November 6.