At Tesla’s annual shareholder meeting today, Elon Musk’s $1 trillion pay package will take center stage, sparking a high-stakes corporate vote on the future of the company’s iconic CEO.
Tesla’s board has laid out the decision clearly. Chair Robyn Denholm emphasized that the choice at hand is whether shareholders want to “retain Elon as Tesla’s CEO and incentivize him” to propel the company to new heights as the leader in autonomous solutions and the most valuable company globally.
Having previously faced setbacks with a $56 billion award being struck down by a Delaware judge, Musk has since not received any official compensation. Now, Tesla is seeking approval from investors for an even larger pay package.
The proposed payout for Musk is contingent on achieving incredibly ambitious milestones.
The package comprises 12 tranches, each equivalent to 35.3 million shares, linked to market capitalization objectives and operational goals.
These milestones range from a $2 trillion market cap target to a final goal of $8.5 trillion.
Operational targets include:
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Delivering 20 million vehicles within a decade, surpassing Tesla’s production in the past twelve years.
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Securing 10 million full self-driving subscriptions.
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Manufacturing 1 million humanoid robots through Tesla’s Optimus division.
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Operating 1 million robotaxis commercially.
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Achieving earnings milestones in eight consecutive quarters, each measured over four quarters.
While these targets are theoretically attainable, Tesla has faced challenges in meeting recent operational benchmarks.
As highlighted by BI, Musk himself reframed the situation during the latest earnings call: “I just don’t feel comfortable building a robot army here and then being ousted because of some asinine recommendations.”
Proxy advisers ISS and Glass Lewis are advocating for a negative vote, citing concerns about “excessive power” and inadequate oversight. Musk has retaliated in recent days, labeling them “corporate terrorists.” However, with his significant 13% ownership stake and a strong support base of retail shareholders who typically back him, his supporters argue that the odds are in his favor. Billionaire investor Ron Baron, as quoted by CNBC, stated, “Elon is the ultimate ‘key man’ of key man risk. Without his relentless drive and uncompromising standards, there would be no Tesla.”
Norway’s $2 trillion sovereign wealth fund has declared its intention to vote against the proposal due to concerns regarding “the total size of the award, dilution, and the lack of mitigation of key person risk.” Corporate governance expert Nell Minow indicated that she would only consider the package if Musk “shut up about politics” and dedicated his full attention to Tesla rather than dividing his focus among xAI, SpaceX, Neuralink, The Boring Company, and his political endeavors.
Furthermore, shareholders will need to evaluate Musk’s suggestion for Tesla to invest in his AI startup xAI, which he believes Tesla would have supported “long ago” if the decision were up to him.
Amidst these discussions, broader governance concerns are up for debate. Although Tesla’s board has advised against all shareholder accountability measures, including annual director elections and reversing a Texas regulation limiting the ability of certain investors to sue the board, New York State Comptroller Thomas P. DiNapoli insisted that these actions contravene fundamental principles of good corporate governance and should be reversed.
These deliberations unfold against the backdrop of a turbulent year for Tesla. The company stands at the threshold of advancements in AI and robotics, while studies suggest that Tesla could have achieved significantly higher sales without Musk’s extracurricular activities. Nonetheless, Tesla’s stock has rallied, rising by 14% this year, partially fueled by Musk’s own $1 billion stock acquisition.
The outcome of the vote is anticipated to be disclosed following today’s meeting in Austin. Watch the entire meeting below, commencing at 4PM EST:
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