Imagine a CEO asking for a staggering $1 trillion – yes, you read that right! That's the situation unfolding at Tesla, where the company is actively campaigning for shareholders to approve a massive pay package for Elon Musk. But will they agree? This vote could determine not only Musk's future compensation but also the very direction of Tesla itself.
In the lead-up to Tesla's annual general meeting (AGM) this Thursday, the company has launched a full-court press to convince shareholders that Musk is worth every penny of that trillion-dollar figure. Digital ads are flooding the internet, and a dedicated website, Votetesla.com, features a video of board chair Robyn Denholm and director Kathleen Wilson-Thompson singing Musk's praises against a backdrop of triumphant music. They're essentially saying, 'Trust us, he's worth it!'
But here's where it gets controversial... Not everyone is convinced. The AGM in Austin, Texas, is shaping up to be a referendum on Musk himself, particularly given his increasingly vocal political views, which have made him a highly divisive figure. Some argue that his focus has shifted away from actually running Tesla effectively.
Musk himself isn't holding back. He's taken to X (formerly Twitter), the social media platform he owns, to declare that the fate of Tesla "could affect the future of civilization." That's a pretty bold statement, right? He's also been using his platform to amplify support from high-profile figures like Michael Dell of Dell Technologies, Cathie Wood of Ark Invest, and even his own brother, Kimbal Musk, who sits on Tesla's board. Kimbal went as far as to say, "There is no one remotely close to my brother," to which Elon responded with a simple "Thanks bro ❤️."
And this is the part most people miss... The opposition isn't just about the money. Critics argue that the focus on Musk and the drama surrounding his compensation distract from the core issues facing Tesla, such as declining sales. "What's amazing to me is a company struggling to sell cars spends money on advertising to sell a pay package," says Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management, who has reduced his Tesla holdings and become increasingly critical of the company's direction. Gerber believes Tesla needs to refocus on its primary mission: selling electric vehicles.
So, what exactly is this "trillion-dollar deal"? It's not a direct salary. Instead, it's tied to ambitious performance goals. Musk has to increase Tesla's market value to $8.5 trillion (from $1.4 trillion) and oversee the successful launch of a million self-driving "Robotaxi" cars. This is no easy feat, considering the less-than-stellar initial reception of Tesla's self-driving technology. If he achieves these milestones, he'd receive 423.7 million new shares, which would be worth close to $1 trillion if the target valuation is reached.
It's worth noting that this isn't the first time Musk's compensation has sparked controversy. Tesla previously secured shareholder approval for a pay package worth tens of billions, contingent on him increasing Tesla's market value tenfold. He achieved that goal, but in 2024, a Delaware judge struck down the deal, citing concerns that Tesla's board members were too closely aligned with Musk. That decision is currently under review by the Delaware Supreme Court, adding another layer of complexity to the current situation.
"The strategy is more of the same from Tesla, which is not to say that this is normal. Nothing about Tesla is normal," says Dorothy Lund, a professor at Columbia Law School. She points out that these kinds of "get-out-the-vote" campaigns are usually seen when a company is worried about activist shareholders pushing for significant changes. "[But] never in my life have I seen something like that happen in the context of a compensation decision," she added.
Furthermore, unlike the previous vote, both Elon and Kimbal Musk will be able to vote on this compensation package, potentially swaying the outcome in their favor. Remember, Elon Musk is already the world's richest man, having recently become the first known half-trillionaire.
Tesla's defense of the pay package hinges on the argument that Musk might leave if shareholders reject it. They claim he is indispensable and possesses the unique leadership qualities needed to achieve Tesla's long-term goals. However, critics argue that the board's role is to represent shareholders' interests, not to advocate for the CEO. Matthew Kotchen, an economics professor at Yale School of the Environment, even co-authored a study attempting to quantify the damage Musk has done to the Tesla brand lately due to his public persona and actions.
Several influential voices are urging shareholders to vote against the pay package. Proxy advisors Glass Lewis and Institutional Shareholder Services (ISS) have recommended rejection, citing the excessive amount and potential dilution of shareholder value. Norway's sovereign wealth fund and CalPERS, the largest public pension fund in the US, have also voiced their opposition. New York State Comptroller Thomas DiNapoli has even called for the rejection of directors up for re-election, arguing they have failed to provide independent oversight.
With institutional investors hesitant, Musk may need to rely on Tesla's large base of retail investors, who tend to be more supportive of him. According to Morgan Stanley analyst Adam Jonas, Thursday's vote is one of the "most important events" in Tesla's history, with a "distinct possibility" that the pay package will fail. And let's not forget the anti-Tesla protests that continue to pop up, fueled by Musk's controversial political stances.
"It's hard for me to imagine that Elon Musk, in the very near term, shakes off the damage that he's done to this brand," says Kotchen. But others maintain that Musk's track record of innovation and success makes it unwise to bet against him, even with such a massive sum at stake. "It's hard to deny that Elon Musk's larger-than-life personality has helped drive more interest and awareness for his organization than almost any other corporate leader in the modern era," says Jessica Caldwell, head of insights at Edmunds. "He's become a more polarizing figure over time, but there's still a belief in his ability to deliver on bold, unconventional ideas."
So, what do you think? Is Elon Musk worth $1 trillion? Should shareholders approve this massive pay package, or is it an excessive reward that could harm Tesla's future? Share your thoughts and opinions in the comments below!
