Tesla Shareholders Vote on Musk’s $1 Trillion Pay Package

Tesla shareholders are set to vote on Thursday, October 27, 2023, regarding a groundbreaking pay package for CEO Elon Musk. This unprecedented plan, designed to retain Musk for at least seven-and-a-half years, could potentially reward him with up to $1 trillion, contingent on achieving specific performance milestones.

The board of directors, led by Chair Robin Denholm, has publicly endorsed the proposal, emphasizing its importance for the company’s future. In recent interviews, Denholm highlighted that without Musk’s leadership, Tesla’s value could significantly diminish. “Without Elon, Tesla could lose significant value, as our company may no longer be valued for what we aim to become: a transformative force reimagining the fundamental building blocks of mobility, energy and labor,” she stated in a message directed at shareholders.

Musk, who possesses a net worth exceeding $500 billion, is already the world’s richest individual. He stands to increase his shareholding in Tesla from over 12 percent to more than 25 percent if the package is approved. The initial tranche of the compensation would become available once Tesla reaches a market capitalization of $2 trillion. Additionally, the package includes ambitious targets, such as delivering 20 million Tesla vehicles, alongside various operational goals.

As the vote approaches, there is significant public interest, including planned protests outside Tesla’s gigafactory in Austin, Texas. Activists argue that the pay package is excessive and reflect broader societal issues. “A trillion dollars is way too much any person should have under any circumstances,” said activist Ethan McBride, criticizing the proposal as a means of “enriching the man who is funding degradation of our democracy.”

Despite the board’s support, some major shareholders, including Norges Bank Investment Management, one of Tesla’s largest stakeholders, have expressed their opposition. The fund cited concerns over the package’s size, potential shareholder dilution, and risks associated with Musk’s concentrated influence. “While we appreciate the significant value created under Mr. Musk’s visionary role, we are concerned about the total size of the award,” they stated on their website.

The advisory firms Glass Lewis and Institutional Shareholder Services (ISS) also criticized the pay proposal. According to an analysis by ISS, the separation of the package into tranches of “unprecedented” value could undermine the necessity for all established goals to be achieved. They pointed out that Musk’s financial interests are already closely aligned with Tesla’s performance, raising questions about the need for additional incentives.

On the other hand, support for Musk’s pay package comes from some quarters, including Florida state officials, who praised his track record of creating shareholder value. They referred to the proposed compensation as the “gold standard for executive compensation,” reflecting Musk’s substantial contributions to Tesla’s growth.

The outcome of this pivotal vote will be revealed at Tesla’s annual shareholder meeting in Austin. The decision will not only shape Musk’s future with the company but also resonate within the broader conversation about executive compensation and corporate governance in the technology sector.