Elon Musk Criticizes Influence of Proxy Advisory Firms Over Corporate Voting Power

Tesla CEO Elon Musk has raised serious concerns about the growing influence of proxy advisory firms — particularly Institutional Shareholder Services (ISS) and Glass Lewis — in corporate governance. According to Musk, these firms have accumulated disproportionate power over shareholder decisions, despite having no actual ownership stake in the companies whose fates they influence.

In a recent statement, Musk argued that nearly half of all publicly traded shares are now held by passive index funds, which often delegate their voting rights to proxy advisors like ISS and Glass Lewis. This dynamic, he claimed, has led to a situation where corporate decisions are being swayed by organizations that lack both accountability and direct investment interests.

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The Power of Passive Funds and Proxy Advisors

Passive index funds — such as those run by major asset managers like BlackRock, Vanguard, and State Street — track market indexes rather than actively selecting stocks. Because of their vast holdings across thousands of companies, these funds typically rely on third-party firms to handle the complex process of voting on shareholder resolutions and board elections.

This delegation has effectively given proxy advisors such as ISS and Glass Lewis tremendous influence over corporate governance decisions, including executive compensation, board appointments, and policy proposals.

Musk contends that this system is deeply flawed, as these firms “often vote along random political lines” and prioritize ideological or social agendas instead of shareholder value and long-term company performance.

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Tesla as a Case in Point

Citing a recent example, Musk highlighted that both ISS and Glass Lewis recommended voting against the re-election of Tesla board member Ira Ehrenpreis, one of the company’s longest-serving and most respected directors. The reason given was “insufficient gender diversity” on Tesla’s board.

Ironically, the same advisory firms also recommended voting against the re-election of Kathleen Wilson-Thompson, a highly qualified female board member — an apparent contradiction that underscores Musk’s claim of inconsistency and bias in proxy voting recommendations.

“These firms have no ownership themselves,” Musk remarked, “yet they can dictate how half the shareholders vote. That’s a broken system.”

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A Broader Corporate Governance Problem

While Musk’s frustration stems from Tesla’s specific experiences, the issue extends far beyond one company. Many executives and investors have voiced similar concerns that proxy advisory firms wield excessive influence without proper transparency or accountability.

Critics argue that this concentration of power can distort market outcomes by allowing non-invested intermediaries to shape the direction of public companies, often pushing political or environmental agendas that may not align with shareholders’ financial goals.

Supporters of ISS and Glass Lewis, however, counter that their recommendations are intended to promote good governance and ethical standards, ensuring that corporations remain responsible to a broader set of stakeholders, including employees, communities, and the environment.

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Calls for Reform

Elon Musk’s comments reignite a growing debate over the balance of power between shareholders, fund managers, and proxy advisors. Policymakers and market regulators in the U.S. have already begun reviewing the role of these firms, with discussions about increasing oversight, requiring more transparency in voting recommendations, and limiting conflicts of interest.

Musk and other corporate leaders are advocating for reforms that would return voting power directly to individual investors, rather than allowing passive funds to delegate it. Such a shift, they argue, would make corporate decision-making more democratic and reflective of the true interests of shareholders.

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Conclusion

Elon Musk’s criticism highlights a crucial and often overlooked flaw in the modern financial system — the disconnect between share ownership and voting power. As passive investing continues to dominate global markets, the question of who truly controls corporate America becomes increasingly urgent.

Whether or not reforms follow, Musk’s remarks have sparked a renewed conversation about accountability, transparency, and the integrity of shareholder democracy — issues that could shape the future of corporate governance for decades to come.