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ISS, a leading proxy advisory firm, has become the second such company to advise Tesla investors to vote against a $56billion pay packet for CEO Elon Musk.
The advisory firm joins Glass Lewis, its major competitor, in calling for shareholders to veto the package, describing it as ‘excessive.’
The eye-watering compensation plan would be the biggest for any CEO in corporate America.
Tesla justifies the multi-billion-dollar outlay based on the market value of Tesla and its progress toward operational goals.
In January, a judge in Delaware voided the compensation plan, which was set in 2018, citing conflicts of interest and a failure by the electric vehicle maker to fully disclose the details of the plan.
In response, Tesla has pushed to reincorporate in Texas, where – provided shareholders approve Musk’s $56billion pay package – any investor unhappy with the arrangement would have to mount a fresh legal challenge.
Tesla has asked its investors to vote on the plan in an annual shareholder meeting on June 13.
ISS pushed investors to reject the plan. “Although the structure of the grant’s performance hurdles arguably contributed to, as well as reflect, the company’s significant financial growth during the performance period, the total award value remains excessive, even given the company’s success,” the report states.
The report also highlights a lack of clarity on what the vote would mean for Musk’s future compensation packages and argues the grant does not focus Musk on the interest of Tesla’s shareholders rather than his other business endeavors.
Some investors at Tesla are reportedly concerned that he is distracted by his other businesses including X, xAI, and SpaceX, alongside his controversial and outspoken comments in the media. Accordingly, some see the vote as a referendum on Musk.
Tesla is yet to respond to ISS but has hit back at the similar remarks from Glass Lewis, arguing that Musk creates wealth for Tesla and its investors, and says it is necessary to make sure he prioritizes Tesla above his other work.
Some studies have highlighted the growing gap in the CEO-average employee pay ratio. According to an Economic Policy Institute study, the ratio was 399:1 in 2021, specifically excluding Elon Musk whose ratio would have skewed the results.
Earlier in 2024, Oxfam reported the wealth of the world’s five richest men nearly doubled since 2020 to reach $869billion by November 2023, finding that nearly five billion people become poorer in this period.
