Who Really Holds the Power in Tesla's Big Vote?

Tesla's upcoming vote on Elon Musk's massive pay package has sparked a heated debate. At the heart of the controversy are proxy advisory firms, which guide shareholders on how to vote.

Proxy Firms vs. Prominent Investors

Two major firms, ISS and Glass Lewis, are advising against the package. They argue it's too generous and could dilute the value of existing shares.

Cathie Wood, a prominent investor, disagrees. She believes these firms have too much influence. Wood points out that index funds, which own lots of shares, often follow the advice of these proxy firms. She argues that this system stifles innovation and gives too much power to passive investors.

Index Funds and Voting Power

Index funds, like those managed by Vanguard, State Street, and BlackRock, do conduct research for voting decisions. However, Wood claims they don't do enough to support bold moves. She suggests that these funds should have less voting power, as they focus more on tracking indexes than driving change.

Tesla's Defense

Tesla, meanwhile, defends the pay package. The company argues that the proxy firms' rigid approach hurts shareholders. They point to a previous pay package approved in 2018, which these firms also opposed.

Concerns from Other Groups

Other groups, like the SOC Investment Group, share the proxy firms' concerns. They worry that the pay package could silence public shareholders. They argue that Musk's incentives are already aligned with Tesla's success, given his massive stake in the company.

Retail Investors' Potential Influence

Despite the opposition, Wood believes retail investors will support the package. She notes that these individual investors hold about 40% of Tesla's voting shares. If they vote in favor, Musk's pay package could pass, despite the recommendations of the proxy firms.