Proxy advisory giant Institutional Shareholder Services (ISS) is recommending Tesla shareholders vote against CEO Elon Musk’s proposed $1 trillion pay package and the company’s potential investment in Musk’s AI startup, xAI.
In a report released Friday, ISS labeled Musk’s performance-based stock award as “astronomical,” raising concerns over its size and structure—even though Musk would only receive the payout if Tesla’s market value surges to $8.5 trillion from its current $1.1 trillion. The firm also advised a “no” vote on a nonbinding proposal for Tesla to invest in xAI, which merged with Musk’s X (formerly Twitter) earlier this year.
The proposed 10-year compensation plan would grant Musk additional Tesla shares if he meets aggressive milestones, including scaling Tesla’s robotaxi business and expanding into robotics and AI. If successful, the package would raise Musk’s ownership stake in Tesla to at least 25%, a threshold he says is necessary to guard Tesla’s AI tech from activist interference.
Tesla’s board argues the deal is essential to maintain Musk’s focus on the company amid his involvement in other ventures. But ISS remains unconvinced and has previously advised against Musk’s compensation packages, including the 2018 plan that was overturned by a Delaware judge. That case is still under appeal.
ISS’s influence could impact large institutional shareholders, as it shapes voting patterns among index funds. It also advised against re-electing longtime Tesla board member Ira Ehrenpreis but supported directors Joe Gebbia and Kathleen Wilson-Thompson.
Tesla fired back on X, accusing ISS of “completely” missing key governance and investment principles and called the opposition to Ehrenpreis “unfounded and nonsensical.”
The shareholder vote on Musk’s pay package and related proposals is scheduled for Tesla’s upcoming annual meeting.