Proxy advisory firm Institutional Shareholder Services (ISS) has once again recommended that Tesla shareholders vote against a proposed $1 trillion pay package for CEO Elon Musk. This marks the second consecutive year ISS has opposed a significant compensation plan for the tech mogul. The firm's guidance, issued on October 17 ahead of the November 6 shareholder vote, cited several "unmitigated concerns" regarding the plan's magnitude and design.

A primary concern for ISS revolves around Elon Musk's divided attention across his multiple ventures. With five businesses under his purview—Tesla, Neuralink, SpaceX, the Boring Company, and xAI—ISS expressed apprehension that while the extensive pay package aims to retain Musk and maintain his focus on the electric vehicle (EV) manufacturer, there are "no explicit requirements to ensure that this will be the case." This lack of guaranteed commitment from Musk to Tesla's operations, despite the staggering compensation, was a key factor in their opposition.

Tesla swiftly countered ISS's stance, posting a detailed response on Elon Musk-owned social media site X. The company urged shareholders to support its recommendations, asserting that ISS "completely misses fundamental points of investing and governance." Tesla argued that ISS recommended against compensation shareholders had previously approved twice and which Musk had already earned. They also highlighted the structure of the 2025 CEO Performance Award, stating Musk receives nothing unless shareholders achieve substantial gains. Tesla labeled ISS's recommendations as "unfounded and nonsensical," indicative of their disconnection from reality. The company further emphasized the governance framework established by its longest-tenured independent director, Ira, which has coincided with an "astonishing TSR increase of ~39,000%" during his tenure, underscoring the board's high engagement and focus on long-term value. Tesla's appeal to shareholders concluded with a strong call to "Vote with Tesla on ALL proposals," implying ISS had "nothing on the line."

The proposed $1 trillion pay package has not only faced opposition from proxy advisers but also from a diverse group of Tesla investors, including state officials. As reported on October 2, prominent investors such as the SOC Investment Group, the American Federation of Teachers, and state treasurers from Nevada, New Mexico, Connecticut, Massachusetts, and Colorado, along with the comptrollers of Maryland and New York City, collectively urged other shareholders to reject the package at the annual meeting scheduled for November 6. These investors accused Tesla's board of "harming Tesla's reputation" in their vigorous efforts to retain Elon Musk, reflecting broader concerns about corporate governance and executive compensation.

This current dispute echoes a previous controversy surrounding Elon Musk's 2018 pay deal. At that time, both ISS and fellow proxy firm Glass Lewis advised shareholders to reject the package. Despite their recommendations, approximately 75 percent of investors ultimately supported the deal. However, in 2024, a Delaware judge invalidated the 2018 plan, ruling that Elon Musk wielded undue influence over the decision-making process and that the board harbored conflicts of interest. In response to this legal setback, the world's richest person cited the pay dispute as a reason for Tesla's decision to relocate its corporate headquarters from Delaware to Texas. Currently, Elon Musk and Tesla are engaged in a legal appeal against this ruling, with arguments presented before the Delaware Supreme Court on October 15, indicating the ongoing legal and governance challenges surrounding his compensation.