ISS advises shareholders to vote against

Top proxy advisor Institutional Shareholder Services recommended on Friday Tesla Shareholders vote against reapproval of CEO Elon Musk's $56 billion pay package and withhold support for President's re-election News Corp. scion James Murdoch on the car manufacturer's board.

The report, a copy of which was obtained by CNBC, comes after the other influential proxy advisory service, Glass Lewis, also recommended shareholders vote against Musk's pay package. Tesla's board is seeking shareholder approval to reinstate Musk's pay after a Delaware court annulled the package earlier this year.

ISS said “cautious” shareholder support was deserved for Tesla's plans to reincorporate from Delaware into Texas, although the proxy advisor also warned that there are concerns about how Tesla's board decided to reincorporate and about the ” unknown” nature of Texas’ business law framework. .

The proxy advisor recommended support for some shareholder proposals that Tesla management opposes, including one that would declassify Tesla's board. A classified or diversified board is considered by some advisors to be an effective defense against a takeover bid.

“At a mega-cap company like Tesla, what is perhaps even more relevant to shareholders is that a distributed board can prevent shareholders from holding directors accountable for poor responsiveness,” ISS said of its support for the declassification proposal.

Tesla has sought shareholder support in both tried and tested ways. The company enlisted communications agency FGS Global and proxy lawyer Innisfree M&A to win votes, and has bolstered the apparent support of its large network of social media influencers. The company also launched a website, VoiceTesla.comand has offered shareholders the opportunity to do so win a tour from Tesla's Gigafactory factory in Austin.

Tesla is seeking shareholder approval for Musk's payday while also seeking a reincorporation from Delaware into Texas. The company has characterized the Delaware chancellery's ruling that annulled Musk's stock as unfriendly to shareholders, pointing to the value Musk has created for investors.

“In recent years it has become clear that Delaware is no longer the right jurisdiction for us,” says Tesla chairman Robyn Denholm said in a letter to shareholders earlier this week.

Tesla has adopted tactics that other companies have used in contentious shareholder meetings, winning votes and launching a concerted PR effort to win support. While Tesla is not facing any organized resistance to its efforts to reinstate or reauthorize Elon's compensation package, some shareholders have spoken out against it. Billionaire Leo KoGuan has repeatedly said he will vote against the package. KoGuan says he owns about 0.75% of Tesla stock, worth about $4.9 billion.

This is a development story. Check back later for updates.