Technology

I learned some advisors at firms who usually follow Glass Lewis recommendations are taking unusual steps to request investor input specifically on Tesla. Apparently enough passive investors are dissatisfied enough to want a direct say on Tesla.

It was interesting to learn about shareholder voting.

• Apparently, shareholders get a non-binding vote on executive pay due to say-on-pay legislation.
• The SEC carries juicy documents on shareholder voting proposals & letters to shareholders by other shareholders urging them how to vote.

Voting proposals from shareholders & their letters reveal great dissatisfaction with Tesla.

Major shareholders (investment groups, pension managers, state treasurers & comptrollers) wrote a scathing letter urging other shareholders to vote against directors up for re-election & to vote against proposals the company favors.

We write urging you to oppose the reelection of Directors Ira Ehrenpreis, Joe Gebbia, and Kathleen Wilson-Thompson (Proposal 1), the Amended and Restated 2019 Equity Incentive Plan (Proposal 3), and the 2025 CEO Performance Award (Proposal 4) at Tesla’s Annual Meeting on November 6, 2025.

Since the last annual meeting, we have unfortunately witnessed both the erratic performance of Tesla, Inc. (the “Company” or “Tesla”) and the Board’s failure to provide meaningful real-time oversight of management. The Board’s relentless pursuit of retaining its CEO seems to have harmed the Company’s reputation, led to extraordinarily high levels of executive compensation, and delayed progress on meeting key goals like full self-driving (FSD). The Board, a majority of which is made up of directors with close ties to the CEO, now asks for Tesla shareholders to approve a series of proposals that grant it broad discretion to execute an estimated $1 trillion pay package, as well as grant awards through a new reserve created specifically for Elon Musk. These pay packages provide so much discretion to Tesla’s Board that shareholders cannot be confident of impartial treatment. In summary, there is an urgent need to address these issues to preserve long-term shareholder value for all Tesla shareholders, which we believe justifies voting against all directors up for election this year, as well as the Amended and Restated 2019 Equity Incentive Plan (the “A&R 2019 Equity Plan”) and the 2025 CEO Performance Award (the “2025 Performance Award”). We believe that approval of these items is not in the economic or financial interest of Tesla shareholders for the reasons set out below.

Their clarifications are interesting: they highlight issues with the conduct of the board & CEO

• declining company performance (sudden decline in sales) & waning competitiveness with rivals like BYD & other manufacturers
• board's lack of independence from CEO jeopardizes shareholder value
  • board members are CEO, friends of CEO, or have served long tenures
  • the CEO lacks focus on the stable, sustainable returns of the company & its shareholders while the board still awards him extraordinary pay packages & shares at discount
    • has leadership roles in several companies
    • leadership of US DOGE negatively impacted company’s performance & brand
  • the CEO fails to focus the company's own resources on the company (diverting them to other companies), and the board "seems uninterested in getting concrete commitments from Mr. Musk, and unwilling to develop a CEO succession plan of their own"
  • the board of directors is overpaid by earning 8 figure compensation when the "Average director compensation in the S&P 500 in 2024 was $327,096.13"
• the board ignores mandates from previous shareholder votes, and acts to weaken accountability (supermajority voting rules, not all board seats up for reelection each year) & erode shareholders rights (adopted a Texas law to increase requirements for shareholders to sue the board for breach of fiduciary duty prohibitively far above federal standards)
• their proposal for a $1 trillion award in shares to the CEO lacks stringent conditions
  • undemanding product goals
  • vague terms
  • conditions open to board discretion

  Given the Board’s historical willingness to allow Tesla to commit substantial resources to projects that are personally beneficial to Mr. Musk but that fail to produce benefits for Tesla shareholders – most notably the Solar City acquisition – we lack the confidence that this Board will only recognize the accomplishment of these goals by the CEO in the fullest and most demanding way.

• the award increases power of an unaccountable CEO at substantial expense to shareholders of earning & voting power.

outside Tesla shareholders could experience a dramatic long-term dilution in both their voting power and the value of their equity relative to opportunity cost

If Tesla were to experience similar ups and downs over the next decade, outside shareholder value would increase at 10.8% per year, inferior to the price return for the S&P 500 from August 2015 to August 2025.

If Proposals 3 and 4 are approved, this year may be one of the last times that public shareholders have a meaningful voice in the Company and its leadership given the level of dilution that is likely to take place. Beyond that, the Company’s own disclosures make clear that the motivation to deliver these pay packages is driven by increasing Mr. Musk’s voting power, with no formal commitment to focus his time, attention, and Tesla’s own resources on Tesla. Further, we lack confidence that this non-independent Board can oversee the CEO toward a future that maintains stable and sustainable returns for Tesla shareholders.

This SEC 14A filing lists all the proposals up for shareholder vote. A good number of shareholder proposals the board opposes concern board accountability to shareholders

• assert shareholder rights: either repealing restrictions or safeguarding them from restrictions enabled by Texas that would disqualify the vast majority of shareholders from submitting proposals or suing the board for breach of fiduciary duties
• elect each director annually
• require only simple majority approvals.

The others concern better public reporting & oversight on senior executive pay & transparent audits on child labor dependence throughout the supply chain.

To promote an independent board of directors accountable to shareholders & to restore shareholder rights, I suspect Glass Lewis and ISS will vote against all board members & company-favored proposals and vote for all shareholder-favored proposals. Seems about right to follow their recommendations & oppose Musk on this.