Tesla’s CEO Elon Musk has once again found himself at the center of a heated debate over executive compensation, as leading proxy advisory firm Institutional Shareholder Services (ISS) has recommended that Tesla investors vote against a proposed pay package for Musk that could ultimately award him nearly $1 trillion in stock. This recommendation comes in advance of Tesla’s 2025 annual shareholder meeting, scheduled for November 5, where investors will vote on several key issues—including this record-shattering compensation plan.
### The Proposed Pay Plan: Unprecedented in Scale
The pay package under scrutiny is described by ISS as a "mega performance equity award." Designed to retain Musk as Tesla’s CEO over the long term, the plan would grant him up to an additional 12% stake in the company if a series of ambitious performance targets are met. Chief among these targets is the requirement for Tesla to achieve a staggering market capitalization of $8.5 trillion—more than quadruple the current market value of the world’s most valuable companies. If all conditions are met, Musk’s personal ownership of Tesla would increase significantly, making the plan the largest compensation award ever granted to a public company CEO.
According to ISS, while the plan holds the promise of "enormous value for shareholders" if targets are achieved, it also raises "unmitigated concerns surrounding the special award’s magnitude and design." The advisory firm argues that the sheer size of the award and its structure could set a troubling precedent for corporate governance and executive compensation norms.
### Tesla’s Response: Defending the Pay Plan
Tesla’s leadership was quick to respond to the ISS recommendation, disagreeing with the advisory firm’s assessment. In a statement posted to X (the social media platform owned by Musk), Tesla accused ISS of missing "fundamental points of investing and governance." The company pointed out that similar pay packages for Musk had previously been subject to shareholder votes, with the majority supporting them. Tesla asserted that the proposed plan aligns Musk’s interests with those of shareholders, as Musk only benefits if the company’s value grows dramatically—meaning "Elon receives nothing unless shareholders win big."
Furthermore, Tesla encouraged shareholders to follow the board's recommendations and vote in favor of the pay proposal, along with all other board-backed measures on the 2025 proxy.
### A History of Controversy: The 2018 Pay Package
This is not the first time Musk’s compensation has come under fire. In 2018, Tesla granted Musk a performance-based pay package valued at an estimated $56 billion, which was also recommended against by ISS. The controversy escalated when the Delaware Court of Chancery ruled that the 2018 award had been improperly granted, citing that Tesla’s board failed to disclose critical information to shareholders and that Musk had exerted undue influence over the board’s decision-making process.
The court’s decision mandated that the 2018 pay package be rescinded. Musk has since appealed this ruling to the Delaware State Supreme Court, with oral arguments heard by a panel of judges in the past week. The outcome of this appeal could have significant implications for the current proposal, as well as broader standards for executive compensation and board governance in the United States.
### The Role of Proxy Advisory Firms
ISS, along with other influential proxy advisors like Glass Lewis, plays a pivotal role in shaping shareholder votes, especially among institutional investors and passive index funds. These third-party firms analyze corporate proposals and provide recommendations regarding how shareholders should vote on various issues during annual meetings. Their opinions can sway substantial blocks of votes, often determining the fate of hotly contested proposals.
Elon Musk has previously criticized ISS and Glass Lewis, accusing them of wielding outsized influence over corporate outcomes and, in some instances, likening their power to that of a "terrorist organization"—a comparison widely deemed baseless and inflammatory. Nevertheless, the recommendations of proxy advisory firms remain highly influential, and their skepticism toward Musk’s pay package poses a real challenge to its approval.
### Musk’s Influence Over the Vote
Despite the ISS recommendation, Musk is not without significant leverage in the upcoming vote. He currently controls at least 13.5% of Tesla’s voting shares, according to recent disclosures. This sizable stake gives him substantial influence over the outcome, and, if coupled with support from other large shareholders, could be enough to secure approval for the nearly $1 trillion pay plan.
Musk has recently increased his shareholding even further, purchasing another $1 billion worth of Tesla stock