Elon Musk attends the 2024 Breakthrough Prize Ceremony at Academy Museum of Motion Pictures on April 13, 2024 in Los Angeles, California.
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Top proxy advisor Institutional Shareholder Services on Friday recommended Tesla shareholders vote against the re-approval of CEO Elon Musk’s $56 billion pay package and withhold their support from the re-election of News Corp. scion James Murdoch to the automaker’s board.
The report, a copy of which was obtained by CNBC, comes after the other influential proxy advisor service, Glass Lewis, also recommended shareholders vote against Musk’s pay package. Tesla’s board is seeking shareholder approval to reinstate Musk’s pay after a Delaware court voided the package earlier this year.
ISS said “cautionary” shareholder support was merited for Tesla’s plans to reincorporate out of Delaware and into Texas, although the proxy advisor also warned that there are concerns over how Tesla’s board decided to reincorporate and over the “unknown” nature of Texas’s business law framework.
The proxy advisor recommended support for some shareholder proposals that Tesla management opposes, including one that would declassify Tesla’s board. A classified or staggered board is considered by some advisors to be an effective defense against a takeover bid.
“At a mega-cap company like Tesla, what is perhaps even more relevant to shareholders is that a staggered board can hinder shareholders from holding directors accountable for poor responsiveness,” ISS said of its support for the declassification proposal.
Pay package push
Tesla has been courting shareholder support in both time-tested and novel ways. The company engaged communications firm FGS Global and proxy solicitor Innisfree M&A to win votes, and has bolstered apparent grassroots support from its large network of social-media influencers. The company also launched a website, VoteTesla.com, and has offered shareholders the chance to win a tour of Tesla’s Gigafactory facility in Austin.
Tesla seeks shareholder approval for Musk’s payday and concurrently to reincorporate out of Delaware and into Texas. The company has characterized the Delaware chancery court ruling that overturned Musk’s stock package as unfriendly to shareholders, noting the value that Musk has created for investors.
“Over the last several years it has become clear that Delaware is no longer the right jurisdiction for us,” Tesla chair Robyn Denholm said in a letter to shareholders earlier this week.
Tesla has adopted tactics other companies have used in contested shareholder meetings, whipping votes and launching a concerted public-relations effort to win support. While Tesla is not facing any sort of organized opposition to its efforts to reincorporate or re-approve Elon’s pay package, some shareholders have voiced their vocal opposition to it. Billionaire Leo KoGuan has repeatedly said he will vote against the package. KoGuan says he owns around 0.75% of Tesla shares, worth around $4.9 billion.
This is a developing story. Please check back for updates.