Another top proxy advisor has recommended shareholders vote against Elon Musk's $56 billion Tesla pay package

• Institutional Shareholder Services recommends Tesla shareholders vote against Musk's huge pay deal.
• It comes after Glass Lewis, another proxy advisor, made the same recommendation.

Influential proxy advisor Institutional Shareholder Services (ISS) has recommended that Tesla shareholders vote against Elon Musk's proposed $56 billion pay package.

The ISS said in a report that the Tesla CEO's share options deal, initially outlined in 2018, was "outsized from the start," Bloomberg reported.

"Some investors may find the board's argument compelling, that it would be unfair for Musk not to receive the award," the report continued.

"However, the concerns raised, both back in 2018 and in the interim, have not been sufficiently mitigated, particularly given that the board has effectively only offered shareholders an 'all or nothing' option in this vote," it added.

It comes after Glass Lewis, another leading proxy advisory firm, also urged Tesla investors to vote against the deal.

Glass Lewis said the deal was of "excessive size" and "dilutive" and raised concerns over Musk's many "time-consuming projects" — particularly the social media platform X, formerly Twitter.

"Mr. Musk's slate of extraordinarily time-consuming projects unrelated to the Company was well-documented before the 2018 grant and only expanded with his high-profile purchase of the company now known as X," Glass Lewis said in its report.

Tesla was quick to respond to the report in a letter to shareholders titled "What Glass Lewis Got Wrong About Tesla."

The letter, published on Wednesday, said that the proxy advisor had relied on "speculation and hypotheticals," used "faulty logic," and omitted "key considerations."

ISS gave "cautionary support" for a proposal to reincorporate Tesla in Texas, but it noted that the board's process toward the move left "something to be desired," per Bloomberg.

On the other hand, Glass Lewis urged shareholders to reject the proposed move, saying it offered them "uncertain benefits and additional risk.

Musk has previously hit out at the power of proxy advisors

Proxy advisors help shareholders decide how to vote at shareholder meetings, and they can have "significant influence" over investors' voting decisions, according to a report published by the Harvard Law School Forum on Corporate Governance.

Musk has previously hit out at the amount of influence such firms have.

"Far too much power is concentrated in the hands of 'shareholder services' companies like ISS and Glass Lewis because so much of the market is passive/index funds, which outsource shareholder voting decisions to them," he wrote in a post on X in January 2023.

"ISS and Glass Lewis effectively control the stock market," he added.

Investors will vote on his pay package at Tesla's annual meeting on June 13.

Musk, who also runs SpaceX, Neuralink, and the Boring Company, has previously warned that he would develop future products outside of Tesla if his bid to increase his stake in the EV maker were blocked.

Musk's controversial compensation package was initially approved by 73% of investors in 2018, but a Delaware judge struck it down in January over concerns about its size and the board's independence.

Tesla's board has since been working to persuade investors to support the deal.

If the board can prove investors still support it, it could help in an appeal of the decision to void it.