Tesla urges investors to ignore trillion dollar warning from influential firm

With its latest pay package, Tesla TSLA believes it has the carrot to keep CEO Elon Musk engaged and leading the company on the right track.

So when proxy advisor firm Institutional Shareholder Services urged shareholders on Friday to vote 'no' on the pay package that could net Musk $1 trillion if he hits all the incentives, Tesla did not respond kindly.

"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," according to an ISS note.

Tesla shareholders will vote at the company's annual meeting on November 6.

Musk holds nearly 16% of Tesla's stock, while individual investors own about 35% and institutional investors own the rest.

ISS also told shareholders to vote against a proposal to ratify Musk's 2018 pay package after it had been struck down by a Delaware judge in 2024. That measure passed with 72% of the votes in favor.

On Friday, Tesla responded to ISS.

Tesla calls ISS shareholder letter 'unfounded' and 'nonsensical'

In addition to voting against the pay package, ISS also recommended voting against a nonbinding proposal to use Tesla money to invest in another Musk venture, xAI.

The firm also recommended voting against re-electing longtime Tesla board member Ira Ehrenpreis, though it did support the re-elections of board members Joe Gebbia and Kathleen Wilson-Thompson.

Related: Tesla shareholders share mixed reactions to latest sales pitch

ISS’s unfounded and nonsensical recommendation against Ira proves how disconnected from reality they are. As Tesla’s longest-tenured independent director, Ira has created a governance framework that has allowed Tesla to achieve an astonishing TSR increase of ~39,000% during his tenure.

Tesla on X

Meanwhile, Tesla says Ehrenpreis has been vital to its growth.

"He embodies our high-engagement Board – with hands-on leadership + effective governance with a focus on long-term value," Tesla said on X. "It’s easy for ISS to tell others how to vote when they have nothing on the line."

Tesla wants to pay Elon Musk $1 trillion

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, but the package will be worth much more than that if Tesla reaches the valuation it says it can.

According to the pay package, Musk essentially has 10 years to increase Tesla’s valuation from about $1 trillion to $8.5 trillion. 

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

Tesla is scheduled to report its third-quarter earnings on October 22.

Related: Tesla's surprising delivery data hide a serious problem