KEY POINTS
- Tesla shareholders will vote on 6 November 2025 on a pay plan worth over $1 trillion for CEO Elon Musk.
- Proxy firms advise shareholders to reject the proposal, citing concerns over excess and risk.
Tesla’s upcoming vote on a proposed compensation plan could make history — offering CEO Elon Musk over $1 trillion over the next decade.
However, two prominent proxy advisory firms — Institutional Shareholder Services (ISS) and Glass Lewis — have called for shareholders to reject the plan, deeming it excessive and risky.
In their reports, ISS argued the plan was ostensibly designed ‘to retain Musk and keep his time and attention on Tesla instead of his other ventures.’ Yet, they added that ‘there are no prescriptive elements within the award to ensure his focus remains on Tesla,’ undermining its primary purpose.
Glass Lewis expressed concern over the plan’s structure and potential impact on investors, especially amid ongoing market volatility. The recommendation comes just weeks before the shareholder vote on 6 November, a decision that could influence how much control and reward one executive wields.
The Largest Pay Package in Corporate History
The proposed plan would grant Musk 423.7 million new Tesla shares, increasing his stake from approximately 19.8% to 28.8%, subject to performance targets. Valued at $87.8 billion, ISS estimates the total could reach $104.4 billion. If Tesla hits all ambitious milestones, the package’s ultimate value could surpass $1 trillion.
‘Full achievement of the market capitalisation milestones requires historic growth of approximately $7.5 trillion (as of the grant date) to reach the final $8.5 trillion target,’ ISS noted. ‘This would result in higher market cap than that of Tesla’s largest current competitors in the AI space combined.’
The plan comprises 12 tranches linked to various performance goals, including vehicle deliveries, revenue targets, and product milestones. Tesla states these objectives aim to push the company toward unprecedented innovation, but critics argue the structure guarantees excessive rewards with limited accountability.
Lofty Goals and Vague Benchmarks
The plan’s targets include delivering 20 million vehicles, achieving $400 billion in EBITDA, and reaching a $2 trillion valuation. Additional goals involve obtaining 10 million Full Self-Driving subscriptions, deploying 1 million robotaxis, and manufacturing 1 million AI-powered robots.
Critics argue many benchmarks are vague or easily manipulated. A joint letter from officials and investors, including the American Federation of Teachers and state treasurers from Nevada, Massachusetts and New Mexico, accused Tesla’s board of being ‘beholden to management.’
‘We believe the Board’s failure to ensure CEO Musk devotes full attention to Tesla, while making him the highest-paid CEO in history, shows how beholden it is to management,’ the letter stated.
It noted that targets around vehicle deliveries and Full Self-Driving subscriptions are written in a way that ‘does not actually require full unsupervised self-driving or profit-making operations.’
Shareholder Dilution and Governance Concerns
ISS warned that the ‘astronomical value’ of the grant could dilute existing shareholders due to the ‘extreme value and number of shares being granted.’ They questioned whether such an award was necessary, given Musk already owns nearly 20% of Tesla.
The advisory firm also argued that the size of each tranche could discourage Musk from meeting all targets, as ‘billions can be earned for partial goal achievement.’ ISS warned that ‘the unprecedented size locks in high pay opportunities for years to come.’
Tesla’s board responded via X (formerly Twitter): ‘ISS once again completely misses fundamental points of investing and governance. They recommended against compensation that shareholders have voted on twice before (and that Elon has already earned)… It’s easy for ISS to tell others how to vote when they have nothing on the line.’
The Road Ahead: Governance and Future Prospects
Musk’s previous 2018 pay plan was voided earlier this year after a Delaware court found Tesla’s board lacked independence and failed to act in shareholders’ best interests. Following this, Tesla moved its headquarters to Texas, where Musk and his brother Kimbal Musk can vote their shares on the new proposal.
Despite ISS’s opposition, some analysts believe the package will pass. University of Colorado law professor Ann Lipton told the Financial Times: ‘They recommended against it before and shareholders voted in favour.
This time Elon Musk gets to vote, and his brother gets to vote, so I strongly expect all of these proposals will go Tesla’s way.’
If approved, the deal would solidify Musk’s status as the highest-paid CEO in corporate history, underscoring both the cult of personality surrounding him and the ongoing tension between innovation, governance, and executive compensation in the tech sector.
As one investor quipped on social media: ‘If Tesla wants to reach the moon, it might have to pay for the rocket — and Elon’s the one flying it.’
Originally published on IBTimes UK
