Does Elon Musk deserve a $1 trillion payday?
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By Jack Ewing
I cover the auto industry, with an emphasis on electric vehicles.
Tomorrow, Tesla’s shareholders will make a very big decision: Should the company give Elon Musk, its chief executive, nearly $1 trillion in stock?
Musk and his critics have been waging heated campaigns before the company’s annual meeting in Texas, when it will announce the results of a vote on his compensation package. The fight has distinct echoes of the hostility that characterizes American politics, especially in light of Musk’s on-again, off-again alliance with President Trump.
Even Pope Leo XIV has weighed in, citing Musk’s pay as an example of the gap between rich and poor.
Beyond the jaw-dropping payday, the fight is about control: If the proposal is approved, Musk’s voting stake in Tesla would be around 25 percent. While that is well short of a majority, it would be very difficult to pass measures he opposed.
Tesla is trying to pivot its business to humanoid robots, and Musk told investors and analysts in October that he needed control over Tesla and the “robot army” it hopes to build.
“Control of Tesla could affect the future of civilization,” Musk said on X.
Tesla’s board sees the plan as a way to motivate Musk as he transforms the company from primarily selling electric cars to making robots and self-driving taxis.
But there are big questions about whether the company’s board of directors — which includes Musk’s brother and several longstanding friends and business associates — could award him shares regardless of his performance.
The directors say they’re up for the job of independently assessing Musk’s performance. Tesla’s board is “very active, very independent, and I think the outside world doesn’t appreciate it,” Robyn Denholm, the board’s chair, told me during an interview at Tesla’s California offices in September.
Incentives and loopholes
For Musk to collect the whole package, which is broken into 12 parts, Tesla would have to achieve milestones like selling 10 million subscriptions to self-driving software and increasing earnings before depreciation and other items to $400 billion, from $17 billon last year.
“He doesn’t get any compensation if he doesn’t deliver,” Denholm, the board chair, said.
She said Musk required enormous compensation because he was driven to do things “that no one else has done before, doing things that further humankind.”
But the board could give him some of the shares if it determined that he had missed a product target because of natural disasters, war, interference by government regulators or other, unspecified circumstances.
It would be possible “for Mr. Musk to earn at least the first three tranches of the award without meeting a single operational milestone,” according to a report by Glass Lewis, a firm that advises investors on shareholder votes. Each tranche includes stock worth tens of billions of dollars.
Glass Lewis and ISS Stoxx, another advisory firm, recently recommended that investors reject the pay package. During a conference call last month, Musk accused the firms of “corporate terrorism.”
Major shareholders including pension managers in states governed by Democrats, like California and New York, have opposed the pay plan; those in Republican-led states, like Florida, have supported it.
The mythology of Elon
The intensity of the campaign reflects the board’s eagerness to win the vote by a wide margin to mute criticism, said Ann Lipton, a professor of corporate governance at the University of Colorado Law School.
Many analysts expect the plan to pass because Musk is allowed to vote his own shares, which make up about 15 percent of the total. But if the new pay package secures fewer than half of shares owned by outside investors, it could hurt Tesla’s reputation.
“The mythology of Elon Musk kind of depends on the perception that he has the continuing devotion of Tesla shareholders,” Lipton said.
Denholm warned shareholders in a letter last week that if they rejected the pay plan, Musk might quit Tesla altogether: “We run the risk that he gives up his executive position, and Tesla may lose his time, talent and vision.”
To Musk’s supporters, threatening to walk is a normal way to negotiate. But Randall Peterson, a professor at the London Business School who studies corporate boards, said the dependence on a single executive should be a red flag.
“The graveyards are filled with indispensable men,” Peterson said.
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