Tesla shareholders respond to latest push against Elon Musk

On Oct. 17, proxy advisor firm Institutional Shareholder Services urged shareholders to vote "no" on the pay package, potentially be worth $1 trillion, that Tesla TSLA has proposed for CEO Elon Musk.

On Monday, Oct. 20, fellow advisory firm Glass Lewis & Co. followed suit, urging Tesla stockholders to reject the proposal.

According to the offer, Musk essentially has 10 years to increase Tesla’s valuation from about $1 trillion to $8.5 trillion to receive the highest compensation. 

Tesla performance benchmarks for Elon Musk:

• 20 million Tesla vehicles delivered
• 10 million active FSD subscriptions
• 1 million bots delivered
• 1 million Robotaxis in commercial operation
• $400 billion of Adjusted EBITDA over four separate quarters

Glass Lewis says the pay plan warrants "significant concern" due to the potential dilution of shareholder power, according to Bloomberg, which viewed the report.

Meanwhile, ISS said it had "unmitigated concerns" about the proposal.

“While it is recognized that the board seeks to retain Musk due to his track record and vision for Tesla’s future, and further that some shareholders may support this award in light of Musk’s successes in achieving growth of the company, there are unmitigated concerns surrounding the special award’s magnitude and design,” ISS said in a recent note.

On Oct. 20, Tesla responded to Glass Lewis.

Tesla to shareholders: Ignore firm's alarms about Musk pay, board of directors

Concern about Musk's compensation isn't anything new for ISS, Glass Lewis, or Tesla.

The pair have consistently warned against giving Musk too much control of the company, but Tesla points out that he has rewarded shareholders' faith in him so far.

Tesla called the Glass Lewis and ISS notes "misguided" and reminded shareholders that "these firms do not own Tesla — you do."

On X (formerly Twitter), Tesla posted:

Shareholders have spoken twice on Elon’s 2018 CEO Performance Award. ISS’s and Glass Lewis’s recommendations attempt to override the mandate our shareholders delivered to Elon and ignore the staggering financial results delivered under Elon’s leadership.

Like ISS, Glass Lewis also recommended that shareholders vote against longtime Musk confidant Ira Ehrenpreis retaining his independent director board seat. Ehrenpreis joined the board in May 2007 and is its longest-serving member.

Unlike ISS, Glass Lewis also said shareholders should vote against Kathleen Wilson-Thompson, another Musk confidant who has been a member of Tesla's board since December 2018.

"Kathleen has been a part of two of the most transparent governance processes in modern day corporate America and brings decades of legal, operating, compensation, human capital and management expertise critical to winning the AI talent war," Tesla said on X.

Giving Musk what he wants comes with real risk, expert says

To keep Tesla CEO Elon Musk happy, the company needs to pay him a lot more money and give him much more power. 

Last month, Tesla awarded Elon Musk a new pay package that is worth about $29 billion now, subject to shareholder approval. However, the package will be worth much more than that if Tesla reaches the valuation it says it can.

Related: Tesla urges investors to ignore trillion dollar warning from influential firm

Shareholders are set to vote on the proposal at the company's annual meeting on November 6.

Tesla says shareholders should vote "yes" on all the company's proposals, but one expert says they should think twice about giving Musk all of that power.

"Is Musk too distracted by SpaceX, xAI, and everything else to give Tesla his full focus? That’s a fair question... and exactly why strong, independent board oversight matters," Dominick Miserandino of Retail Tech Media Nexus said.

"Free markets don't mean free passes; accountability and transparency still count."

Related: Elon Musk takes shot at rival facing major problem