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The controversy over the various compensation packages awarded to Elon Musk by the Tesla board since 2018 took a new turn this week. A shareholder organization called SOC Investment Group has asked NASDAQ — not the Securities and Exchange Commission — to invalidate the latest proposed compensation package on the grounds that it violates the trading platform’s rules designed to protect shareholders of publicly traded companies.
The SOC Group, formerly known as the CtW Investment Group, works with pension funds sponsored by a coalition of unions representing over 2 million members. Many of those funds are Tesla investors. Fortune reports that in a letter sent August 19, 2025, to Erik Wittman, deputy general counsel and head of enforcement at NASDAQ, the group expressed “serious concerns” about Musk’s new compensation package.
Specifically, SOC said it was concerned that Tesla’s board found a way to get around NASDAQ listing rules when awarding Musk the “2025 CEO Interim Award” the board approved earlier this month. It claims that plan should have required a shareholder vote as stipulated by NASDAQ rules, since it materially amends Musk’s compensation plan.
The Tesla board approved Musk’s compensation package under the company’s 2019 Equity Incentive Plan, which was designed to replace the $56 billion options package from 2018, known as the “2018 CEO Performance Award.” That older award has been overturned on two separate occasions by the Delaware Chancery Court. The judge in Delaware, after an exhaustive review, ruled the Tesla board members lacked independence and were little more than surrogates controlled by Musk. Stooges, in other words, and highly paid stooges at that. Her decision has been appealed to the Delaware Supreme Court, where a decision is pending.
A Hedge Against The Delaware Court Decision
Fortune reporter Shawn Tully noted in a story published on August 6 that the new package will only apply if the Delaware Supreme Court upholds the decision by the Chancery Court judge. He also noted that, unlike with the original $56 billion award, the newer $29 billion award includes restrictions that are designed to protect shareholders — at least in theory.
The shares vest on the second anniversary of the grant — which will happen in early August, 2027 — but only if Musk serves as CEO or chief of product development or chief of operations during the entire two-year period. He cannot sell any of those vested shares until five years later — which is to say August 3, 2030.
According to Fortune reporter Amanda Gerut, despite those restrictions, the package does not contain specific performance targets that Musk needs to achieve. Brian Dunn, director of the Institute for Compensation Studies at Cornell University, told Fortune that industry insiders sometimes refer to such restrictions as “fog the mirror grants.”
What does that mean? Simply this: “If you’re around and have enough breath left in you to fog the mirror, you get them.” While the restrictions give the appearance of protecting shareholders, they don’t require the recipients to actually do anything that adds to shareholder value. In other words, it’s a charade.
A Shareholder Avoidance Device
That is not what the SOC Investment Group letter to NASDAQ is about, however. Instead, the group argues the Tesla board deliberately avoided getting shareholder approval for the package, which is contrary to NASDAQ listing policies that all companies whose shares are listed on the exchange are required to honor.
Tejal Patel, executive director of the SOC Investment Group, told Fortune in an interview that the “real issue is the fact that the original plan … was pretty clear in the disclosures that the company did not intend to include Elon Musk in that plan.” Acknowledging that such issues are usually raised with the Securities and Exchange Commission, she added: “Admittedly, this is the first time I’ve flagged something like this to NASDAQ [and that’s] because it was a very specific listing standard.” Her understanding of the NASDAQ standard is that “this is exactly what it was designed to avoid.”
The SOC Investment Group contends that when Tesla shareholders approved the 2019 Equity Incentive Plan, company disclosures explicitly excluded Musk from eligibility, and stated Musk’s compensation would be tied to the 2018 award exclusively. “When shareholders voted on the 2019 Plan it is likely that, based on the available disclosures and research, they did not believe they were voting on an equity plan that would cover compensation to Mr. Musk,” the SOC letter notes, “precisely because of the ‘truly extraordinary’ nature of the 2018 CEO Performance Award.”
The SOC letter also notes that Tesla’s 2019 proxy statement repeated multiple times that the 2019 plan was not intended to cover awards to Musk. Furthermore, the letter mentions that major proxy advisory firms indicated the 2018 CEO Performance Award was “intended to be the sole means of compensation for Mr. Musk, relying on the Company’s disclosures.” Therefore, the 2025 CEO Interim Award “appears to expand the class of participants under the 2019 Plan in manner that would be sufficiently material to require a separate shareholder vote.”
The letter also warns that Tesla’s board has indicated further interim awards could follow, potentially bypassing shareholder votes while the Delaware case is pending. It urges NASDAQ to act to restore “the rightful balance between shareholder and management’s interests,” while ensuring shareholders have the ability to fully understand how executives are being compensated.
Director Independence
SOC has “real concerns over director independence,” Patel told Fortune. “This is sort of the outcome of having a board that is not independent.” She said her group is concerned with issues over a lack of director independence and the constant redefinition of Musk’s responsibilities within the company — particularly as Musk delves into multiple activities unrelated to managing Tesla. She also suggested that the outsized new compensation package, under which Musk would get the same financial rewards whether he was CEO or serving in a lesser role, is “pretty unheard of.”
This is not the first time SOC Investment Group has been involved with Tesla. It has repeatedly opposed large pay packages for Musk. It opposed the original 2018 plan that awarded Musk $56 billion — a position the judge in Delaware later agreed with. It has also encouraged shareholders to vote against related awards it believed did not comply with proper corporate governance standards.
It also opposed the re-election of Kimbal Musk and James Murdoch as directors, claiming they were not truly independent of Musk’s influence and therefore were not acting in the best interests of shareholders. It has joined with other investors to promote shareholder resolutions that call for Tesla to adopt comprehensive labor rights policies, including non-interference with union organizing campaigns and compliance with global labor standards both in the US and in other countries.
Public Interest Vs. Private Interest
The problem with being a public corporation is that it gives shareholders the right to demand that their interests are fairly included in the decisions that affect the value of their shares. Not being highly skilled corporate lawyers, we are not in a position to assess whether the concerns raised by SOC Investment Group are reasonable, but for many years there have been concerns that the Tesla board was a captive of Musk’s influence and more concerned with doing his bidding than running a publicly owned corporation.
It has recently come to light that the compensation paid to Tesla board members is as much as 100 times higher than the norm for corporate directors in general. That fact alone adds to the appearance that they are more concerned with feathering their own nest than protecting the interests of all shareholders. Whether the letter to NASDAQ has any significant consequences remains to be seen.
Hat tip to Dan Allard
Featured image: “Elon Musk overlooking the remains of F9R” by jurvetson (CC BY 2.0 license).
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