Tesla Inc. CEO Elon Musk has spoken out against proxy advisory firms Institutional Shareholder Services Inc. and Glass Lewis, labeling them as ‘corporate terrorists’ due to their opposition to his $1 trillion CEO compensation award.
The Issue at Hand
Musk took to social media platform X to express his thoughts on the matter, stating that the fundamental issue is passive index firms controlling over half of all publicly-traded shares. These funds outsource their shareholder vote to advisory firms, which often vote along random political lines unrelated to shareholder interests. Musk emphasized that this is a major problem plaguing not just Tesla, but other companies as well.
Lack of Ownership and Misguided Voting
Musk criticized ISS and Glass Lewis, stating that they have no actual ownership themselves and often make recommendations that are destructive to the future of the company. He cited the example of the firms recommending against the re-election of Tesla director Ira Ehrenpreis for insufficient gender diversity, while also recommending against re-electing Kathleen Wilson-Thompson.
Retaining Control and Shareholder Interests
During the earnings call, Musk referred to the firms as ‘corporate terrorists’ and emphasized that the shareholder vote is about retaining control over the EV giant. He reassured investors that the voting share wouldn’t allow him to be fired if he were to go insane. Musk also expressed his discontent with the firms’ past recommendations, stating that if they had been followed, they would have been extremely destructive to the company’s future.
Tesla’s Mixed Bag Earnings Call
The comments follow Tesla’s Q3 earnings report, which was a mixed bag. The company reported $28.095 billion in revenue, beating Wall Street consensus, but missed estimates of $0.54 EPS, reporting $0.50 instead. This marks the fourth straight miss for Tesla.
Defense of Musk’s Pay Package
Tesla Board Chair Robyn Denholm defended Musk’s pay package, criticizing the proxy advisors’ ‘one-size-fits-all’ approach as misguided. Denholm stated that this approach is not ideal for companies like Tesla, which challenge the status quo.
What’s Next?
The debate surrounding Musk’s pay package and the role of proxy advisor firms is likely to continue. With Tesla’s shareholder meeting approaching, all eyes will be on the outcome of the vote and the future of the company.