Elon Musk may be in for the largest pay package any corporate chief has ever been given, but not everyone believes he should receive it. One large Wall Street advisory firm is instructing Tesla shareholders to vote against Elon Musk’s suggested $1 trillion compensation package when the proposal is put to them next month.
Institutional Shareholder Services, or ISS, made its recommendation on Friday. The group provides recommendations to large shareholders on how to vote on company issues, and their vote is considered influential. They’re advising Tesla shareholders to vote against the $1 trillion pay proposal when they vote on Nov. 6. Actually, this is the second consecutive year that ISS has advised investors to vote against awarding Musk an enormous pay package. They voted against another plan last year, and a Delaware judge ended up rejecting Musk’s $56 billion pay package anyway. And now Tesla’s board has returned with an even larger proposal.
Why the Plan Is So Controversial
The magnitude of this compensation package is difficult to comprehend. ISS estimates it at $104 billion, but Tesla pegs it at $87.8 billion. Regardless, it’s an enormous sum of money. The structure it’s in, Musk might still earn tens of billions even if he fails to meet most of the targets Tesla has placed on him. ISS complains that this is a problem. They note that the scheme “locks in extraordinarily high pay opportunities over the next ten years” and makes it difficult for Tesla’s board to change things later on if necessary. The advisory company also frets about something known as dilution. When Tesla grants Musk this many additional shares, it devalues everyone else’s shares slightly.
What Musk Must Do to Get Paid
Musk would have to reach some pretty extreme targets in order to receive the full amount. Tesla would need to be valued at $8.5 trillion, which is much more than any company has ever been worth. The firm would also have to sell 20 million vehicles, construct one million robotaxis, and earn $400 billion in profit. Those are enormous targets that could perhaps not even be achieved.
But the point is that Musk doesn’t need to meet all of them to be paid. The mechanism of the plan is such that he gets rewarded for halfway success as well. Tesla’s shares increased when they initially announced this compensation package last month. Most investors believe that linking Musk’s compensation to these large objectives will encourage him to pay more attention to Tesla rather than his other ventures, such as SpaceX and X.
Tesla Fights Back
Tesla is not accepting this criticism lying down. The firm issued a statement responding that ISS “once again totally misses key principles of investing and governance.” Tesla board member Kathleen Wilson-Thompson defended the proposal in a video, stating that individuals are employed at Tesla exactly because of Musk.
“We understand that keeping and motivating him will, in the long term, help us keep and hire better talent,” she said. Tesla also had a dig at ISS, asserting, “It’s easy for ISS to tell others how to vote when they have nothing on the line.” The company is keen to get shareholders to pass all the proposals at the meeting.
Musk Can Vote Too This Time
Here’s something new that differs from last time. In contrast to the 2018 pay package that was thrown out, Musk can vote his own shares in this instance. He has a voting stake of around 13.5% in Tesla. That may be sufficient to pass the plan even if the majority of other shareholders vote against it.
Large passive investment funds tend to mimic the guidance of ISS, but votes by Musk himself, along with votes from enthusiasts of his product, could see the deal pass. The vote is on November 6, and all eyes will be on them. If it’s successful, Musk gets the largest pay package in corporate history. If not, Tesla’s board needs to go back and work out how to keep its beloved CEO content without making history.
News At Glance
- ISS calls for shareholders to vote down Musk’s proposed $1 trillion Tesla pay package.
- Second year ISS has urged opposition to Musk’s compensation plan.
- Musk may earn tens of billions without even reaching most targets.
- Pay asks Tesla to hit an $8.5 trillion valuation and produce 20 million vehicles.
- Musk gets to vote his 13.5% stake this time, perhaps guaranteeing approval.
FAQs
- How much is Elon Musk’s proposed pay package worth?
ISS puts its value at $104 billion, although Tesla estimates $87.8 billion, the biggest ever submitted.
- When will Musk’s pay be voted on by shareholders?
Shareholders will vote on November 6, 2025.
- What does Musk need to do in order to receive the total amount?
Tesla needs to achieve $8.5 trillion market value, sell 20 million cars, produce 1 million robotaxis, and make $400 billion.
- Can Musk vote on his own pay package?
Yes, unlike the 2018 plan, Musk can vote his 13.5% stake this time.
- Why does ISS oppose the pay plan?
They say it’s too large, rewards partial achievement too generously, and limits board flexibility on future pay.
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