‘Sad, if not cursed’: Cathie Wood slams proxy firms that say Elon Musk’s $1 trillion pay package is too rich

wood He said In a post on Sunday X It is “sad, if not devastating”, that proxy advisory firms, which make recommendations on how shareholders should vote during company annual meetings, have so much influence. Wood’s comments come after two of the most important proxy firms, Institutional Shareholder Services (ISS) and Glass-Lewis, urged shareholders to reject during Tesla’s annual meeting on November 6 a giant pay package that would give the world’s richest man 29% of the company, up from about 13% now.

Wood particularly criticized the relationship between these proxy companies and index funds, which have significant influence on voting due to the large number of shares they control for their investors. Each shareholder gets a certain number of votes based on the number of shares he or she owns. However, large institutional investors, including index funds, control vast amounts of shares held by their investors, which gives them voting control.

She added: “Index funds do not do fundamental research, but they dominate institutional voting. Index investing is a form of socialism. Our investment system is broken.”

Both companies recommended by proxy that shareholders vote against Musk’s pay package, in part because it dilutes existing investors’ shares and gives Tesla shares High compensation plate Lots of flexibility when it comes to the goals Musk has to achieve to get the full return, which is equivalent to the company’s total market capitalization.

In another series of posts, Wood added that ISS and Glass Lewis don’t see the potential ARK Invest has in Tesla, and it appears the proposed index funds should be stripped of their voting power. The largest holding of ARK Invest’s flagship ARK Innovation ETF is Tesla, which makes up about 12% of its $8 billion portfolio.

“I believe history will determine that Glass Lewis and ISS were a threat to innovation, enabling passive investors who care about ‘tracking bugs’ into their indexes but little else,” Wood said. books In a post he points out how closely index funds track indices like the S&P 500.

While investors in an active fund know that its management may push for changes to the company if it is struggling, the same is not true for passive investors who put their money in index funds, said Russell Rhodes, an associate professor of financial management at Indiana University.

“In general, if you put money in a fund, it’s supposed to reflect that index, and that’s a passive investment,” he said. “I’m just investing in the market and I’m not trying to influence anything any other company is doing.”

Tesla, for its part, said in a statement Monday that the dealer companies are not considering the previous 2018 pay package that shareholders approved on two different occasions that allocated $56 billion to Musk over 10 years. Both ISS and Glass Lewis also recommended voters reject the 2018 pay package.

“Glass Lewis’ one-size-fits-all checklists undermine shareholders’ interests, including by opposing proposals designed to build long-term value at Tesla,” the statement read.

When reached for comment, representatives for Glass Lewis and ISS addressed the matter luck To their dealer paperwork regarding Tesla.

Ahead of the proxy companies’ reports, SOC Investment Group, which works with pension funds sponsored by major unions such as the International Brotherhood of Teamsters, as well as several parties interested in Tesla including state finance officials, signed an agreement letter With the SEC urging shareholders to vote “no” on Musk’s pay package earlier this month.

If Musk’s pay is approved and the three board members are re-elected, “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 occur,” the letter said.

said Tejal Patel, CEO of Tesla shareholder SOC Investment Group Although the company claims that Musk needs more incentives to stay connected with Tesla, Musk’s incentives should actually be in line with the company whose stock represents the bulk of his capital. $455 billion net worth. SOC has publicly criticized Tesla and its corporate governance regarding Musk’s multiple pay packages for multiple reasons.

“We do not believe that these pay packages will truly incentivize Mr. Musk to remain at Tesla, or focus on Tesla during his other business endeavors,” Patel said. luck.

However, Wood said she is confident Musk’s pay package will pass, partly due to the support of retail investors, who still hold about 40% of Tesla voting shares.

“Although proxy firm ISS recommended against approval of the package, retail investors are likely to dominate the vote again. America!”