Elon Musk attends the 2024 Breakthrough Awards at the Academy Museum of Motion Pictures on April 13, 2024 in Los Angeles, California.
Taylor Hill | Getty Images
Friday’s Top Proxy Advisor Institutional Shareholder Services Recommendations Tesla Shareholders vote against re-approval of CEO Elon Musk’s $56 billion compensation package and drop support for re-election News Corp. Successor James Murdoch joins carmaker’s board.
Tesla’s shareholder meeting is scheduled to be held on June 13.
CNBC obtained a copy of the report, which comes after Glass Lewis, another influential proxy advisory service, also recommended that shareholders vote against Musk’s compensation package. Tesla’s board is seeking shareholder approval to restore Musk’s pay after a Delaware court invalidated the plan earlier this year.
ISS said Tesla’s plan to move from Delaware to Texas deserves “cautious” shareholder support, although proxy advisers also warned there are concerns over how Tesla’s board decided to re-enter the company and Texas The “unknown” nature of state business laws worries the framework.
Proxy advisers have recommended support for a number of shareholder proposals that Tesla management opposes, including one that would declassify Tesla’s board of directors. Some advisers believe that classified or staggered boards are effective defenses against takeover bids.
“At a large company like Tesla, perhaps more relevant to shareholders, staggered boards could prevent shareholders from holding directors accountable for poor responses,” ISS said of its support for the declassification proposal.
Paid plan push
Tesla has been seeking shareholder support in novel, time-tested ways. The company hired communications firm FGS Global and attorneys Innisfree M&A to win votes and gain visible grassroots support from its vast network of social media influencers. The company also launched a website, Vote Tesla.comand provides shareholders with opportunities win tour Tesla’s Gigafactory factory in Austin, Texas.
Tesla seeks shareholder approval for Musk’s payday while reorganizing from Delaware to Texas. The company described the Delaware Chancery Court’s ruling overturning Musk’s stock plan as unfriendly to shareholders and pointed to the value Musk has created for investors.
“Over the past few years, it has become clear that Delaware is no longer the right jurisdiction for us,” the Tesla chairman said. Robin Denholm said in a letter revealed to shareholders earlier this week.
Tesla has adopted a strategy used by other companies at contentious shareholder meetings, seeking votes and running a coordinated public relations campaign to win support. While Tesla’s efforts to restructure or re-authorize Musk’s compensation package haven’t faced any meaningful organized opposition, some shareholders have spoken out against it. Billionaire Leo Koguan has repeatedly said he would vote against the plan. Kaiyuan said he owns about 0.75% of Tesla shares, worth about $4.9 billion.
Agency Advisor Pull
Panoramic view of the Tesla Gigafactory in Austin, Texas, USA, on February 28, 2023.
Tsuyoshi Nakamura | Reuters
ISS and its smaller peer Glass Lewis are important factors in shareholders deciding how to vote in annual elections. Their recommendations were closely watched amid controversy but were not clear calls. Still, they have earned a reputation as important bellwethers and seek to defend shareholders.
They are also the direct targets of Musk’s ire. During an earnings call earlier this year, he Comparing the International Space Station to the terrorist organization “Islamic State”, also known as the Islamic State. Musk also said they had “effective control of the stock market.” 2023Xsaying they wield outsized influence over so-called passive or institutional shareholders.
However, institutional shareholders such as BlackRock and Vanguard Group don’t always vote in favor of ISS’s recommendations. While voting decisions are typically not revealed until after the shareholder meeting, these institutional shareholders have due diligence teams that can help them decide how to mint the millions of shares they manage on behalf of investors.
ISS said in the report that its previous concerns about pay packages dating back to 2018 have not been alleviated and “remain excessive,” noting that “the board effectively only offered shareholders an ‘all-or-nothing’ in this vote. There’s no choice at all.”
The proxy adviser cited Musk’s numerous other business ventures, such as social media platform X, his artificial intelligence startup xAI and SpaceX, as another reason why Tesla shareholders shouldn’t support the compensation package.
“This grant in many ways fails to achieve the board’s other original goals, which were to allow CEO Musk to focus on the interests of Tesla shareholders rather than other business activities and to align his financial interests with Tesla,” ISS said. To align the financial interests of shareholders more closely.
Tesla did not immediately respond to a request for comment.
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