Institutional Shareholder Services (ISS) has urged Tesla shareholders to vote against CEO Elon Musk’s proposed $1 trillion compensation package ahead of the company’s annual meeting on November 6. ISS described the plan as “astronomically large” and expressed concerns over its structure, which could result in substantial payouts even if Musk achieves only partial performance targets. The package, which includes 423 million stock options, is contingent upon ambitious goals such as increasing Tesla’s market capitalization to $8.5 trillion and delivering 20 million vehicles annually.

ISS highlighted that the plan could lead to significant dilution of existing shareholders’ stakes and reduce the board’s flexibility in adjusting future compensation levels. The advisory firm also noted that Musk’s involvement in multiple ventures, including SpaceX, Neuralink, and xAI, may impact his focus on Tesla’s long-term objectives. Despite these concerns, Tesla’s board argues that the package is essential to retain Musk’s leadership and drive the company’s growth in areas like robotics and artificial intelligence.

The recommendation from ISS adds pressure on Tesla’s board, as the firm wields considerable influence over institutional investors. However, the board remains confident, citing that Musk’s leadership has been instrumental in Tesla’s success and that the performance-based nature of the compensation aligns his interests with those of shareholders. The upcoming shareholder vote is expected to be closely contested, with both sides presenting compelling arguments regarding the future direction of the company.

In conclusion, the debate over Musk’s proposed pay package underscores the challenges companies face in balancing executive compensation with shareholder interests. As the November 6 vote approaches, Tesla’s shareholders will need to carefully consider the potential implications of the plan on the company’s governance and long-term strategy.

Source: CNBC.