Elon Musk Denounces Advisory Firms as 'Corporate Terrorists'

Elon Musk's Fiery Defense of His $1 Trillion Pay Package

In a dramatic turn during Tesla's earnings call on Wednesday, Elon Musk captured attention by labeling influential proxy advisory firms as "corporate terrorists". This outburst came as the firms, namely Institutional Shareholder Services (ISS) and Glass Lewis, urged shareholders to reject his proposed $1 trillion pay package.

Musk's Response to Advisory Firms

After a period of relative silence following his resignation from the Department of Government Efficiency and the ensuing tensions with former President Donald Trump, Musk did not hold back his criticism. He expressed deep concern about the recommendations from the advisory firms, stating, "I just don’t feel comfortable building a robot army here and then being ousted because of some asinine recommendations from ISS and Glass Lewis, who have no freaking clue. I mean, those guys are corporate terrorists."

Questioning the Role of Proxy Advisory Firms

In a follow-up post on X, Musk expanded on his views about proxy advisory firms. He echoed sentiments from ARK Invest CEO Cathie Wood, arguing that these firms wield excessive influence, particularly over passive investors such as index funds. These investors possess significant voting power due to the large number of shares they hold on behalf of their clients.

Musk stated, "ISS and Glass Lewis have no actual ownership themselves and often vote along random political lines unrelated to shareholder interests! This is a major problem that is not just limited to Tesla."

Understanding the Advisory Firms’ Role

It is important to clarify that advisory firms like ISS and Glass Lewis do not cast votes directly at annual shareholder meetings. Instead, they provide recommendations that are assessed by major institutional investors, including BlackRock, Vanguard, and State Street, each of which conducts its own comprehensive analysis.

Notably, both ISS and Glass Lewis had previously advised against Musk's 2018 pay package on two occasions, although shareholders subsequently approved it each time.

A spokesperson for Glass Lewis emphasized their role, stating in an official comment, "Those that are Tesla shareholders will ultimately make their own decisions about Mr. Musk’s pay proposal and the Board directors that put it forward for shareholder vote." ISS chose not to comment on the matter, and Tesla has yet to respond to requests for further information.

Musk's Ambitious Pay Package

Musk, who has an estimated net worth of $455 billion, indicated that he requires an ownership stake of "in the mid-20s approximately" to fulfill his vision for Tesla. The contentious pay package could potentially reward Musk with a staggering $1 trillion over the next decade, contingent upon achieving specific performance targets. One of these targets includes increasing Tesla’s market capitalization by more than 500%, reaching an impressive $8.5 trillion.

Concerns Raised by Advisory Firms

Earlier this month, both ISS and Glass Lewis released reports casting doubt on Musk's pay package. Their concerns centered on the enormous size of the package and the potential dilution of existing shareholders' stakes.

While Tesla argued that standard benchmarking does not apply to Musk’s compensation—due to the unique nature of his goals—Glass Lewis pointed out in their report that Musk's 2025 performance award is unprecedented when compared to compensation packages at other public companies. They noted it is approximately 33.5 times larger than his previous package from 2018.

In their assessment, Glass Lewis remarked, "It is clear that the quantum, on a realizable and granted basis, outpaces all other pay packages."

Conclusion

As the debate over Musk's pay package continues, the implications of advisory firms' influence on corporate governance and shareholder decisions remain a hot topic. As Tesla shareholders prepare to make their voices heard, the battle lines are drawn between Musk's ambitious plans and the advisory firms' cautionary recommendations.