SEC clears Tesla-crafted auto-vote plan for wide use, worrying activists

The US Securities and Exchange Commission (SEC) has approved a proposal from electric vehicle manufacturer Tesla that allows investors to automatically vote in line with the company's management, sparking concerns among corporate activists. This program, labeled an "issuer voluntary retail voting program," aims to boost retail investor participation in corporate elections, currently at around 30%, towards the 77% rate seen among institutional investors.

Retail investors, despite owning small shares, typically vote alongside management but show apathy in casting ballots due to their insignificant ownership. Tesla's plan, built on discussions with SEC staff, could save companies the expenses of soliciting retail votes, which they spent over $2 million on at recent annual meetings, including one advocating for CEO Elon Musk's compensation package.

The SEC's decision comes amid various steps under the Trump administration aimed at transferring power from investors to corporate executives and boards, a move that could further weaken activist influence. A shareholder activist, James McRitchie, criticized the SEC's decision, stating it is "blatantly one-sided" and advocating for reforms that would let shareholders vote based on their own priorities, such as climate protection or limiting executive pay. The SEC did not provide further comment on the matter.