Trusted in advance: what the Tesla retail voting letter asks of boards

The Boardroom Brief / Essay 4

Board practice

SEC staff have cleared the way for any public company to let retail shareholders vote with the board by default. Here is what a nominating and governance committee should settle before the proposal reaches the full board.

Jacob J. Kahn · Board Director · General Partner, HBS Phoenix Fund · October 22, 2026

Educational commentary, not legal, financial or investment advice. See the note at the end.

Most retail shareholders do not vote. Tesla’s request to the SEC staff cites Broadridge data showing retail investors voted 28% of the shares they owned in the 2025 proxy season, against 76.6% for institutions. Institutions have long been able to set a voting policy once and apply it everywhere. Retail investors could not.

On September 29, 2026, the staff of the SEC’s Division of Corporation Finance issued a no-action letter in response to Tesla’s request for what it calls an issuer voluntary retail voting program. A shareholder who enrolls gives a standing instruction to vote in line with the board’s recommendations at future meetings. The staff had granted ExxonMobil narrower relief in September 2025, and Tesla’s letter reports that more than 100,000 Exxon shareholders had enrolled by March 1, 2026. Goldman Sachs received company-specific relief a day before Tesla for a program tailored to its current and former partners and employees.

The Tesla letter matters to every board for two reasons. First, it is broader: it covers more of the federal proxy rules, enrollment across all of a shareholder’s accounts, enrollment that survives a temporary exit from the stock, and shared enrollment hubs run by shareholder communication providers. Second, the staff stated that any issuer operating a program in the manner Tesla described may rely on the letter without seeking its own. Tesla filed its 2026 proxy statement on October 19 and began offering enrollment, for meetings after its December 3 annual meeting, on the voting platforms shareholders already use.

This is now a template. Management teams will bring it to boardrooms this proxy season, and the first question will land with the nominating and governance committee.

How the program works

The mechanics are simple enough that every director should be able to explain them to a shareholder.

1. Who can enroll. The company decides: all retail holders or a subset, and, if it chooses, registered investment advisers voting client shares. Enrollment is free and open at any time.
2. Two standing instructions. Vote with the board on all matters, or on all matters except “special matters”: contested director elections and any merger, acquisition or divestiture that requires a shareholder vote under state law or exchange rules.
3. Timing. The instruction applies from the next meeting for which a definitive proxy statement has not yet been filed. Opting out works the same way, at no cost.
4. Proxy materials still arrive. Enrolled holders receive every proxy statement and card, and the most recent vote submitted before the polls close controls.
5. Reminders and disclosure. At least once a year, and before any meeting that includes a special matter, enrolled holders are told what they chose and how to change it. The program is described in each proxy statement and on the company’s website, and the enrollment materials are filed with the SEC.

Two limits are worth noting. The only standing instruction on offer is the board’s recommendation; there is no option to follow a proxy advisor or to vote against management by default. And neither the letter nor Tesla’s published program terms say what happens to an enrolled share on a proposal where the board makes no recommendation.

Two readings, both true

Supporters see access. Retail investors get the no-fee, set-once voting that institutions already have, and the Exxon enrollment numbers suggest the demand is real. Companies also spend less chasing turnout: Tesla reports more than $2 million in proxy solicitor costs across its two most recent annual meetings.

Critics see a thumb on the scale. The program runs in one direction only. Under the all-matters option, enrolled shares will back the board in a proxy contest or on a sale of the company before either has been announced. Every recommendation in the proxy arrives with a built-in base of support, which raises the stakes of the question “should we recommend this at all?” and may change how institutions and proxy advisors read a close vote.

A board does not have to choose between these readings. The program does not change what directors owe shareholders; it raises the cost of a careless recommendation. The work is to design and disclose the program so that the first reading stays true and the second is answered in the open.

Where the committee comes in

The nominating and governance committee typically owns the governance guidelines and the shareholder engagement policy, which is where this program lives. Four decisions belong to it, with the full board approving.

Scope

Offer both standing instructions, or only the one that carves out contested elections and shareholder-approved deals? The all-matters option is permitted by the letter and is the feature critics point to first. Limiting scope gives up some certainty in a contest and buys credibility with every holder who is not enrolled.

State law and the company’s own documents

The letter addresses federal proxy rules. Tesla, a Texas corporation, obtained a legal opinion that a standing instruction is permitted under Texas law. A company incorporated elsewhere needs the same comfort from its own counsel, and should check its charter and bylaws before it designs anything.

The words

The program will be described in the proxy, on the website and on the enrollment screen. Directors should read that text before it is filed. Language that stresses never missing a vote and language that stresses supporting the board are both accurate; they invite different reactions, and the board should choose deliberately.

The institutional conversation

Debevoise notes that these programs were not widely used in the 2026 season, so proxy advisors and large index funds have had little to react to. That will change once a program is in place at a company where a vote is close. A board should expect the question in its next engagement cycle and answer it with enrollment numbers and a shareholder-access rationale, not vote margins.

A standing one-page report

Once the program exists, the board should see the same page at every meeting: shares enrolled and the share of the retail base they represent, the mix between the two options, overrides and opt-outs, and, for each proposal, how the vote would have come out without enrolled shares. The committee that oversees controls should also satisfy itself that enrolled shares are reconciled from the enrollment hub to the vote tabulation. The issuer sees aggregate figures only, not the identities of objecting beneficial owners, so that reconciliation sits with the vote processing agent and should be tested. A program the board cannot measure is a program it is not overseeing.

A standing instruction is a vote of confidence given before the question is asked. The board’s job is to keep deserving it.

The letter removes the regulatory reason for not offering retail investors an easier way to vote. It leaves the governance question where it has always been. A board that can now count on those votes will be judged on whether it keeps earning them, one proposal at a time.

Sources

• Tesla, Inc. no-action letter and Tesla’s incoming request, SEC Division of Corporation Finance, September 29, 2026. Broadridge turnout figures, Exxon enrollment, solicitation costs and the Texas law opinion are cited from the request.
• Tesla, Inc. soliciting material on Schedule 14A, filed October 19, 2026 (program terms, enrollment screens and FAQ).
• Exxon Mobil no-action letter, SEC, September 15, 2025.
• Goldman Sachs no-action letter, SEC, September 28, 2026.
• SEC Issues Broad Relief for Retail Voting Programs Under Tesla No-Action Letter, Sullivan & Cromwell, September 29, 2026.
• SEC Staff Expands No-Action Relief for Retail Voting Programs, Harvard Law School Forum on Corporate Governance, October 19, 2026.
• SEC Issues Further Relief for Retail Voting Programs, Debevoise & Plimpton, October 1, 2026.
• SEC issues broad relief under the Tesla no-action letter, IVRVP.com briefing, September 29, 2026.

Jacob J. Kahn serves on the board of the Harvard Aerospace and Defense Alumni Organization, where his responsibilities include nomination and governance, and on the Boston University MBA Council. He is General Partner of HBS Phoenix Fund and previously served on the board and Finance & Audit Committee of Easterseals Massachusetts. He holds an MS in Accounting & Data Analytics and an MBA.

Board CV · jacobjameskahn.com · LinkedIn