At Tesla’s 2025 Annual Meeting, something significant and important happened. The outcome was not determined by proxy advisory firms. Instead, it was driven by shareholders who exercised their independent judgment. The people who actually own the company, both large institutional and retail investors, made it clear that they were no longer willing to let outside consultants dictate how they should vote. Tesla shareholders voted according to what they believed was in their financial interest and would create long-term value.
Shareholders Prioritized Long-Term Value, Not Procedural Playbooks
The first significant decision was the approval of the Amended and Restated 2019 Equity Incentive Plan. In addition to replenishing the equity pool for employee awards, this decision restored the equity framework needed to maintain and execute on Tesla’s pay-for-performance philosophy after a single Delaware judge voided the 2018 CEO Performance Award. That ruling, which was recently overturned by an appellate court, stood in stark contrast to the will of Tesla’s shareholders, who have now affirmed the substance of the 2018 CEO Performance Award on three separate occasions, each with support exceeding 75% of votes cast.
With the foundation reestablished, shareholders then delivered overwhelming support for the 2025 CEO Performance Award, a structure tied exclusively to long-term value creation. Together, these proposal outcomes amounted to a direct and unmistakable rejection of the prominent “against” recommendations issued by ISS and Glass Lewis.
Proxy advisors called Tesla’s plan excessive and unconventional. Shareholders saw something very different. No salary. No cash bonus. No payout unless extraordinary milestones are reached that would benefit all of Tesla’s owners and humanity at large. The message was clear: deliver transformational performance or earn nothing.
Even excluding shares held by Elon Musk, the proposals passed by over 70%, well over the required majority threshold. This fact dismantles any suggestion that founder ownership determined the outcome. Investors voted on the merits. They were not coerced. They were informed by the Special Committee’s radically transparent process and convinced by the economics and the logic of alignment.
Shareholders also understood that the plan aligns leadership incentives with Tesla’s mission. Success is defined by operational breakthroughs, innovation, and value creation on a scale few companies have ever attempted. This is not compensation for maintaining the status quo. It is compensation for executing upon Elon Musk’s vision of Sustainable Abundance by launching groundbreaking AI technologies into the physical world, supporting the creation of a future yet to be realized.
The Decline of Proxy Advisor Influence
ISS and Glass Lewis have long promoted the idea that good governance can be reduced and simplified to standardized checklists and formulaic criteria. Those tools may be serviceable for traditional companies with predictable earnings and mature industries. They are deeply inadequate for many companies, and especially for a company like Tesla.
Tesla operates across artificial intelligence, robotics, autonomous solutions, energy systems, semiconductor development, and advanced manufacturing. It competes in emerging markets that lack established benchmarks and where innovation consistently outpaces regulation. A governance template built for slow-moving industrial firms cannot meaningfully assess a company that is not only already operating across multiple sectors, but also inventing entirely new sectors.
In the run-up to the annual meeting, Tesla urged shareholders to apply independent judgment. The proxy advisors responded with the same familiar objections. Their analyses relied on rigid formulas that ignore the dynamics of companies driven by invention, rapid scaling, and exponential growth. They focused heavily on dilution without addressing the vastly greater economic value required before any portion of the 2025 CEO Performance Award could vest.
Their reports treated Tesla like an ordinary automobile company. Shareholders understood that it is anything but ordinary. Notably, this disconnect has now drawn federal attention, with a recent Executive Order directing regulators to scrutinize foreign-owned and politically motivated proxy advisory firms.
The vote revealed a broader structural issue. Proxy advisory tools are increasingly misaligned with the realities of the modern economy. The companies that drive American competitiveness today generate value through technological breakthroughs, platform ecosystems, and bold strategic bets. These elements cannot be captured through a generic governance rubric. Proxy advisor guidance often rewards conformity and penalizes ambition. Tesla shareholders chose ambition, innovation, and long-term value creation over adherence to outdated orthodoxy.
This was not merely a dispute over compensation mechanics. It was a signal that many investors no longer view proxy advisors as equipped to evaluate companies operating at the frontier of technological and industrial transformation. Shareholders did not reject governance; they rejected a governance framework that fails to understand the company they own.
A Historic Rejection of Litigation Opportunism
Tesla shareholders delivered another decisive message through their vote on Tesla’s Texas-style 3% ownership threshold for filing derivative lawsuits. ISS and Glass Lewis supported the proposal to repeal. Shareholders overwhelmingly rejected it.
Their vote reflects a deeper understanding of a longstanding problem in American corporate governance. While derivative lawsuits can serve a legitimate oversight role, they are too often exploited as vehicles for aggressively opportunistic litigation, enriching plaintiff lawyers at the expense of the very shareholders they claim to represent and resulting in a waste of corporate resources. These suits frequently transfer millions from corporate balance sheets to predatory law firms, with little or no demonstrable benefit to investors.
Texas’ governance reforms, including the derivative threshold, were crafted precisely to address that imbalance. They raise the bar for bringing claims while preserving the ability to challenge real misconduct. In other words, they prioritize accountability without enabling abuse.
Shareholders embraced that balance. They chose disciplined governance over performative litigation risk. They chose predictability and stability over a system that incentivizes lawsuits untethered from shareholder interests. Proxy advisors, once again, did not.
Tesla’s vote stands as one of the clearest modern examples of shareholders refusing to subsidize opportunistic litigation under the banner of “shareholder rights.” In doing so, they reaffirmed that proper shareholder protection comes from aligned incentives and informed judgment, not from reflexively siding with a plaintiffs’ bar that too often views public companies as targets rather than partners in value creation.
A New Model of Shareholder Empowerment
Tesla’s 2025 meeting was not a procedural formality. It was a demonstration of shareholder independence. In supporting management’s proposals, investors embraced three core principles.
First, shareholders are fully capable of exercising independent judgment. They did not mindlessly rubber-stamp the advice of ISS or Glass Lewis. They weighed the information and reached their own conclusions.
Second, shareholders value long-term results, not short-term optics. The CEO plan spans ten years, demands exceptional execution, and rejects quick fixes. It is designed to incentivize durable value creation.
Third, shareholders reject one-size-fits-all governance rules. They understand that companies operating at the leading edge of technology require governance frameworks that support innovation rather than constrain it.
This meeting also challenged the long-held assumption that proxy advisors effectively guide trillions of dollars in votes. Shareholders demonstrated that they are not obligated to accept recommendations that fail to reflect the strategic realities of the businesses they own.
While some claim that diverging from proxy advisor recommendations is risky or signals weak governance discipline, the opposite is true. The most fundamental principle of governance is that shareholders — not consultants — make the final decisions.
What This Means for the Future of Corporate Governance
If other companies follow Tesla’s example, corporate governance may be entering a new phase. Proxy advisors will continue to play a role, but their influence will no longer be supported by blind deference. They will be required to adapt their frameworks to account for the complexity and diversity of modern public companies and the financial interests of shareholders.
This shift will not weaken governance. It will strengthen it. Real governance is not about checking boxes. It is about understanding alignment, risk, strategy, and long-term value creation.
Tesla’s shareholders showed that they are willing to support bold, unconventional strategies when the economics are compelling and the incentives are aligned. They also showed that they can reject proposals that are not in their best interests — even when those proposals are backed by influential advisory firms.
The votes delivered a powerful message to corporate America: Shareholders are capable of making informed decisions about the companies they invest in, and they want their voices to be heard. The days of blind deference to advisory firms that fail to appreciate the complexities of modern-day businesses and shareholder interests are coming to an end.
The Path Forward
Tesla’s 2025 meeting was not a victory for management over critics. It was a victory for shareholders over complacency. Investors chose to evaluate strategy, incentives, and governance on their own terms. They chose value creation over conformity. Most importantly, they chose to assert their role as owners.
It was their vote.
Their judgment.
Their company.
And they made that unmistakably clear.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune. Further, the viewpoints expressed above reflect those of Dr. Goodwin and not necessarily those of the Tesla Board or its Special Committee.
