SpaceX and Tesla CEO Elon Musk attend the Viva Technology Conference held at the Porte de Versailles Exhibition Center in Paris on June 16, 2023.
Gonzalo Fuentes | Reuters
tesla on Thursday will announce the results of a shareholder vote that will determine whether Chief Executive Officer Elon Musk should receive nearly $1 trillion in stock compensation over the next 10 years.
There is little mystery in the results.
The electric car company recommended that shareholders approve the plan. Between Mr. Musk’s substantial ownership and a large retail investor base that almost always votes in favor of the CEO, the numbers make it difficult for opponents, even though top proxy advisers Glass Lewis and ISS recommended voting against the package.
Voting results will be shared after Tesla’s annual meeting in Austin, Texas.
Board Chairman Robin Denholm and other Musk fans argue that the exorbitant pay plan will keep Musk at the helm of the company and that he is critical to Tesla’s future and its competitiveness in robotics and artificial intelligence.
Ron Baron of Baron Capital said in a lengthy post on Musk’s social network X that he supports the Tesla CEO.
“Elon is the ultimate ‘key man’ in key man risk,” Baron wrote. “Without his relentless drive and uncompromising standards, Tesla would not exist.”
But some people are vocally opposed to it. Norway’s $2 trillion sovereign wealth fund, run by Norges Bank Investment Management (NBIM), said it would vote against it. Norges is one of Tesla’s largest shareholders.
“While we appreciate the significant value created under Mr. Musk’s visionary role, we are concerned about the total compensation, dilution, and lack of risk mitigation for key personnel, which is consistent with our views on executive compensation,” NBIM said in a statement this week.
James MacRitchie, a shareholder advocate and governance expert who drives Tesla cars, also opposes the plan. He said the company needs to address a number of risks to demand and profitability, particularly with the repeal of the federal EV tax credit that has long encouraged EV purchases.
“Tesla has a lot of fans. So many individual investors bought the stock because they love cars,” MacRitchie said. “There’s a lot to love there, but you also have to be careful about finances and risks.”
Tesla stock is up 14% this year after a tough start to 2025, with a sharp third-quarter rally pushing the stock higher. Musk’s $1 billion worth of stock purchases helped the rebound.
“Robot Army”
Tesla introduced new pricing plans in September. The package for Musk, already the world’s richest person, consists of 12 tranches of stock that will be awarded if Tesla reaches certain milestones over the next 10 years. It would also give Musk greater voting rights in the company, a request he has made publicly since early 2024.
“If we build this robot army, will we at least have a lot of influence over that robot army?” Musk told analysts during a third-quarter earnings conference last month. “I don’t feel comfortable creating an army of robots, at least without strong influence.”
A full acquisition would give Musk, who owns about 13% of the EV maker, more than 423 million additional shares, bringing his ownership to about 25%.
Musk will receive the first tranche of stock if Tesla’s market capitalization reaches $2 trillion. Tesla’s current market capitalization is $1.54 trillion.
If Tesla’s value increases by $500 billion, up to $6.5 trillion, the next nine tranches will be awarded. If market cap increases by $1 trillion, Musk would get the last two tranches, meaning he would need to reach $8.5 trillion to get the full package.
Other goals related to paid plans include achieving 20 million vehicle deliveries, 10 million active FSD subscriptions, 1 million bots delivered, and 1 million robotaxis in commercial operation. Tesla has delivered more than 8 million vehicles to date, according to its September proxy statement.
The proposed plan does not specify whether you need to purchase an FSD subscription or whether it can include a free trial. Tesla currently offers a partially autonomous driving system, which it sells in the United States as “FSD Supervised.” The company intends to improve the FSD Supervised system so that it no longer requires human supervision inside the vehicle.
Tesla also showed a series of revenue milestones starting at $50 billion in annual adjusted profit and up to $400 billion. In the third quarter, Tesla reported adjusted EBITDA of $4.2 billion.
As Reuters previously reported, Musk could collect tens of billions of dollars without meeting most of the goals set by his board, and could collect more than $50 billion just by hitting some of the more achievable goals.
The terms of the award also include a list of “qualifying events” in which Musk can earn shares without achieving required operational milestones.
Covered events include natural disasters, wars, pandemics, and changes in “international, federal, state, or local laws, regulations, or other governmental acts or omissions” that may prevent the design, manufacture, or sale of products in the future.
Masks have other benefits as well.
The pay plan does not require a minimum amount of time to be devoted to Tesla, and there are no restrictions on political involvement.
In addition to leading Tesla, Musk runs xAI, which merged with X, heads SpaceX and its satellite internet business Starlink, and is the founder of brain-computer interface company Neuralink and tunnel venture The Boring Company.
He is also deeply involved in politics, most notably working to return President Donald Trump to the White House and then leading an effort to completely dismantle the federal government at the beginning of his second term.
Last month, the National Bureau of Economic Research published a paper estimating that Tesla’s sales in the U.S. would have increased by 67% to 83% from October 2022 to April of this year had it not been for Musk’s “polarizing and partisan actions.”
Shareholders are voting on the plan after the Delaware Court of Chancery ruled last year that Musk’s early 2018 pay plan was improperly approved by Tesla’s board of directors and must be revoked.
Nell Minnow, a corporate governance expert and chairman of ValueEdge Advisors, said she would vote against Musk’s current pay plan, describing it as a “part-time CEO.”
“We’re going to pay him $1 trillion, but if he said he was going to give up all his outside activities, shut up about politics, and really spend all his time making this company great, I would say, ‘Okay, let’s talk about it,'” Minow said. “But he has done nothing of the kind.”
Watch: CNBC interview with Tesla Chairman Robin Denholm
