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With just weeks to go before Tesla’s annual meeting, more investors and advisors are urging shareholders to vote against ratifying Elon Musk’s multibillion-dollar pay package.
Top proxy advisory firm Institutional Shareholder Services (ISS) has asked shareholders to vote against Musk’s $46 billion compensation package, which was once valued at $56 billion and was struck down by a Delaware judge in January. The ISS wrote on Friday that the “total award value remains excessive, even given the company’s success.”
Tesla in 2018 decided on a compensation package that would give Musk the right to purchase up to 304 million shares at a price of $23.34, as long as he met a series of increasingly difficult milestones. Almost 75% of shareholders later approved the package. Despite the difficulty of achieving the goals, Tesla had met enough of them by the end of 2022 for Musk to receive the full package.
But Delaware Judge Kathaleen McCormick invalidated the deal in response to a shareholder lawsuit, citing the “deeply flawed” process that led to its approval and calling it an “unfathomable sum” that was unfair to investors. Several board members have close personal and transactional ties to Musk and his companies.
ISS also recommended a vote against the reelection of Tesla board director James Murdoch, Musk’s close friend and the former CEO of 21st Century Fox.
However, unlike fellow proxy advisory firm Glass Lewis, ISS backed the reelection of Kimbal Musk, Elon Musk’s brother, and Tesla’s move to reincorporate in Texas, exiting Delaware. But the firm did express concerns over how Tesla’s board decided to reincorporate and Texas’s business courts, which don’t officially open until September.
Several investors have urged others to vote down the package, including a group of funds represented by New York City Comptroller Brad Lander and Tesla’s biggest retail investor. The California Public Employees’ Retirement System, known as CalPERS, has also urged investors to reject Musk’s compensation. CalPERS is one of the 30 top investors in Tesla and owns 9.5 million shares.
In response to the criticism, Tesla has engaged in a retail politics-inspired public relations blitz.
In a rare move, the company has purchased advertisements and launched a dedicated website promoting the board’s recommendations, while non-affiliated backers are posting online videos and reaching out to “swing voters” for one-on-one discussions. Tesla board chair Robyn Denholm has been reaching out to larger institutional investors to secure support, while Musk been actively promoting the vote on his social media site X, formerly known as Twitter.
Tesla, which recently laid off its short-lived marketing team, on Friday posted voting instructions featuring its Optimus robots, which Musks claims would be able to perform factory tasks by the end of this year. That would be a major advancement from Tesla’s 2021 debut of the robot, which featured a person dancing in a costume.
Tesla stock is down almost 2% in trading Friday.