Tesla’s proposed $1 trillion pay package for CEO Elon Musk has come under renewed scrutiny after proxy adviser Institutional Shareholder Services (ISS) urged investors to vote against what could be the largest compensation plan ever awarded to a company chief.
ISS’s comments on Friday marks the second consecutive year that it has urged shareholders to reject a compensation plan for Musk.
Proxy advisers often sway major institutional investors, including the passive funds that hold large stakes in Tesla.
The ISS recommendation adds pressure on Tesla’s board before a closely watched November 6 shareholder meeting and renews scrutiny of Musk’s compensation after a Delaware court earlier voided his $56bn pay package.
Musk’s record Tesla pay plan could still hand him tens of billions of dollars even if he falls short of most of its ambitious targets, however, thanks to a structure that rewards partial achievement and soaring share prices.
Last month, Tesla’s board proposed a $1 trillion compensation plan for Musk in what it described as the largest corporate pay package in history, setting ambitious performance targets and aiming to address his push for greater control over the company.
ISS said that while the board’s goal was to retain Musk because of his “track record and vision”, the 2025 pay package “locks in extraordinarily high pay opportunities over the next ten years” and “reduces the board’s ability to meaningfully adjust future pay levels.”
Tesla’s shares rose after the compensation plan was unveiled last month, as investors believe the pay package would incentivise Musk to focus on the company’s strategy.
“Many people come to Tesla to specifically work with Elon, so we recognise that retaining and incentivising him will, in the long run, help us retain and recruit better talent,” Director Kathleen Wilson-Thompson said in a video posted to Tesla’s X handle on Friday.
Unlike the 2018 pay deal, Musk will be allowed to vote using his shares this time, giving him about 13.5 percent of Tesla’s voting power, according to a securities filing last month. That stake alone could be enough to secure approval.
The proxy adviser cited the “astronomical” size of the proposed grant, design features that could deliver very high payouts for partial goal achievement and potential dilution for existing investors.
Tesla did not immediately respond to a request for comment from the Reuters news agency.
ISS valued the stock-based award at $104bn, higher than Tesla’s own estimate of $87.8bn.
The grant would vest only if Tesla reaches market capitalisation milestones up to $8.5 trillion and operational targets, including delivery of 20 million vehicles, one million robotaxis and $400bn in adjusted core earnings.
The proxy adviser’s guidance on Musk’s pay was part of a wider set of voting recommendations issued on Friday.
As of 3:45pm in New York (19:45 GMT), Tesla’s stock was up 2.4 percent.
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