Tesla’s proposed $1 trillion pay package for Musk faces investor push back

After proxy adviser Institutional Shareholder Services (ISS) urged investors to vote against what might be the largest compensation package a company chief has ever received, Tesla’s proposed $1 trillion pay package for CEO Elon Musk has come under renewed scrutiny.

The ISS’s comments on Friday marked the second time in a row that it has urged Musk’s stockholders to reject a compensation plan.

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Proxy advisors frequently influence major institutional investors, including the passive funds that own significant amounts of Tesla.

Tesla’s board is under increased scrutiny of his compensation after a Delaware court earlier invalidated his $56 billion pay package in preparation for a closely watched November 6 shareholder meeting.

However, thanks to a system that rewards partial achievement and soared share prices, Musk’s record-setting Tesla pay plan could still pay him tens of billions of dollars even if he doesn’t meet the majority of its ambitious goals.

In what Tesla’s board described as the largest corporate pay package in history, Musk was given a $1 trillion compensation package, setting ambitious performance goals, and responding to his desire to have more control over the business.

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,” according to ISS. Musk’s goal was to be retained because of his “track record and vision.”

Following the unveiling of the compensation plan last month, Tesla’s shares rose, as investors believed Musk would be motivated to concentrate on the company’s strategy.

In a video posted to Tesla’s X handle on Friday, director Kathleen Wilson-Thompson stated that “many people come to Tesla to specifically work with Elon, so we recognize that retaining and incentivising him will, in the long run, help us retain and recruit better talent.”

Musk will be able to cast ballots this time using his shares, giving him roughly 13.5 percent of Tesla’s voting power, according to a securities filing last month. That certainty might be sufficient to secure approval on its own.

The proxy adviser cited the “astronomical” size of the proposed grant, potential dilution for existing investors, and design elements that could result in “very high” payouts for partially accomplished goals.

Tesla did not respond to the Reuters news agency’s request for comment right away.

Tesla’s own estimate of $ 87.8 billion was exceeded by ISS’s estimate of $ 104 billion for the stock-based award.

Tesla will only be able to fulfill its market capitalization milestones of $ 8.5 trillion and its operational goals, including the delivery of 20 million cars, one million robots, and $ 400 billion in adjusted core earnings.

A wider set of voting recommendations was released on Friday that included the proxy adviser’s advice on Musk’s pay.