In the Board’s discretion we recommend Tesla’s report include:
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A robust, comprehensive human rights due diligence process with specific performance metrics aligned with UN Guiding Principles on Business and Human Rights assessing Tesla’s success in preventing and mitigating human rights risks across its value chain.
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A performance-based component in the executive compensation structure directly tied to achieving established human rights and sustainability performance metrics, thus incentivizing the Board to embed such considerations into Tesla’s core operations.
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Integrating sustainability metrics into executive compensation can enhance transparency, promote responsible corporate citizenship, avoid legal and reputational harm, and ensure Tesla remains at the forefront of sustainable business practices. Increasingly, “companies have rejected generous executive-pay packages in shareholder votes… balking at the massive pay gaps between chief executives and workers.”(1) Companies are “embracing different approaches to factoring ESG into executive pay.”(2) Glass Lewis’ 2024 briefing on executive pay reported “a supermajority of the largest companies in Europe and North America now consider ESG performance in at least one incentive program.”(3) Tesla does not integrate environmental or human capital management-related metrics in executive pay, despite 53.6% and 90.4% of S&P 500 companies doing so, respectively.(4)
Tesla’s legal and reputational risks have already materialized. Tesla’s directors were ordered to “return $735 million to the company to settle claims they grossly overpaid themselves in one of the largest shareholder settlements of its kind.”(5) Musk’s $56 billion award has “helped lift the ceiling on CEO pay,” widening the gap between workers’ and executives’ pay packages, per The New York Times,(6) while Reuters now estimates the “package is worth about $101 billion.”(7)

ISS and Glass Lewis denounced ratification of Musk’s court-invalidated award,(8) while Tesla’s Chair urged stockholders to ratify it “to retain Elon’s attention and motivate him.”(9) According to Harvard Law School Forum, “a well-governed board should take a highly critical court decision with the seriousness that it deserves… [b]ut the Tesla Board chose not to,” and instead “misdescrib[ed] the court’s decision in its efforts to obtain stockholder votes for the ratification,” did not cure the Board’s “lack of independence,” and “reinstate[d] the invalidated grant exactly as it was, without even trying to obtain from Musk a time-and-attention commitment.”(10) After the stockholder vote for ratification, the court: continued to express “concern about Musk’s control and influence over the company, including its board;” found “[t]here were undoubtedly a range of healthy amounts that the Board could have decided to pay Musk;” and ultimately struck down the 2018 package a second time, awarding the stockholder-plaintiff $345 million to be paid in cash or Tesla shares.(11)