ISS recommends Tesla investors vote against re-election of board chair

SAN FRANCISCO (Reuters) -Proxy advisory firm ISS on Wednesday recommended Tesla (NASDAQ:) investors vote against the re-election of board chair Robyn Denholm, citing concerns about a lack of scrutiny of the pledging of some company stocks by CEO Elon Musk and his brother Kimbal Musk.

Pledging shares, or using them as collateral for loans, raises risks for Tesla investors given the value of shares pledged by Musk and his brother and the likelihood of further increases, ISS said in a report.

“Pledging does inherently pose risks to ordinary shareholders, and the likelihood of a forced sale of pledged shares increases at a time when the share price (and therefore the value of the collateral) is already declining,” ISS said.

Tesla shares are down about 60% from their record high reached in November 2021.

The shares pledged by Elon Musk accounted for 58% of his Tesla ownership, ISS said.

Musk did not immediately respond to Reuters’ request for comment. In January he tweeted that advisory firms like ISS and Glass Lewis had “far too much power.”

Tesla has a limit on pledging of company stock, setting the maximum loan at $3.5 billion or 25% of the total value of the pledged stock.

ISS recommended votes for Musk and co-founder JB Straubel as board members.

Proxy advisory firm Glass Lewis last month recommended Tesla shareholders vote against Straubel, citing worries about his independence because he served as chief technology officer at Tesla until 2019.

Tesla will hold its annual shareholder meeting on May 16.