On May 29, 2025, Vanguard Group announced a significant expansion of its “Investor Choice” proxy voting program, tripling the number of investors eligible to direct votes in their funds, as reported by Reuters. For Tesla, this could mean heightened pressure on CEO Elon Musk to refocus on the company amid growing ESG (environmental, social, and governance) demands—or even face calls to step down, especially as investors recently demanded he commit at least 40 hours a week to Tesla.

ESG Voting Power Shifts Dynamics for Tesla

Vanguard’s program now empowers around 10 million investors to influence proxy votes, up from a prior 2% participation rate, according to last year’s stewardship chief. With nearly $1 trillion in eligible assets—previously $250 million—within Vanguard’s $10.1 trillion total, this gives shareholders a stronger say in Tesla’s direction. As Tesla’s second-largest shareholder with over 243 million shares (7.56% as of late 2024), Vanguard’s move could amplify ESG-focused pressure on Musk, who has been criticized for diverting attention to political roles like his work with the Department of Government Efficiency (DOGE).

For Tesla, this shift might force Musk to prioritize the company over political endeavors. Investors have already expressed frustration, with a group of shareholders, including pension funds holding 7.9 million shares, demanding Musk dedicate at least 40 hours a week to Tesla. For Musk, known for sleeping on factory floors during intense production periods, 40 hours may seem minimal compared to his usual workload—yet it underscores the urgency for his focus. Posts on X reflect this sentiment, with users noting Tesla’s stock volatility and sales declines as reasons for Musk to “show up and do his job.”

Could Musk Be Forced Out as CEO?

The expanded voting power also raises the possibility of Musk’s ouster as CEO. While Musk owns 12.8% of Tesla (around 411 million shares), institutional investors like Vanguard and BlackRock collectively hold significant sway—over 17% of Tesla stock. Shareholders can’t directly vote out a CEO, but they can pressure the board. If ESG-driven votes push for stricter sustainability or governance reforms that Musk resists, the board might face a dilemma. A major investor recently told Newsweek the board is “negligent” for not removing Musk, citing his political distractions. However, Musk’s $56 billion pay package, ratified by Vanguard in 2024 despite controversy, signals strong shareholder support—potentially tempering calls for his removal.

Technical and Operational Impacts on Tesla

Musk’s refocus could accelerate Tesla’s ESG initiatives. Shareholders might demand faster adoption of sustainable technologies, like solid-state batteries, which could extend the Modèle S‘s 400-mile range closer to 500 miles. Tesla could also face pressure to reduce the environmental impact of its Gigafactory in Nevada, a 5.3-million-square-foot facility, by fully transitioning to renewable energy sources. However, if Musk were forced out, projects like Autoconduite intégrale (FSD) development might face delays—FSD’s rollout, already controlled with a small 10-20 vehicle fleet in Austin, relies heavily on Musk’s vision.

Industry Trends and Leadership Challenges

The EV sector faces growing scrutiny over ESG compliance, with the SEC tightening disclosure rules. Tesla’s labor practices, already criticized, and its battery supply chain, which consumes up to 500,000 gallons of water per ton of lithium, could become focal points for investor votes. Meanwhile, Musk’s political involvement has hurt Tesla’s brand—surveys show 85% of investors believe it’s had a “negative” or “extremely negative” impact. His recent pledge to scale back DOGE work to a day or two a week, equating to roughly 40 hours monthly, might not satisfy investors demanding a full-time commitment.

Musk’s leadership is at a crossroads. Vanguard’s program could either force him to double down on Tesla, aligning with ESG goals, or, if tensions escalate, push the board to consider a new CEO to steer Tesla through its next phase of growth.

Photos courtesy of Tesla