Tesla Board Chair Issues Stark Warning Over Musk’s $1 Trillion Pay Package
Tesla’s board chair, Robyn Denholm, has cautioned shareholders that failure to approve Elon Musk’s proposed nearly $1 trillion compensation plan could result in the CEO’s departure. The stark message was delivered in a letter ahead of Tesla’s annual shareholder meeting scheduled for November 6. Denholm emphasized Musk’s indispensable role in driving Tesla beyond its traditional automotive identity toward advanced technologies such as Full Self Driving (FSD) and the Optimus robot project.
“Without Elon, Tesla could lose significant value, as our company may no longer be valued for what we aim to become,” Denholm wrote.
Shareholder Vote and Opposition
Shareholders must submit online votes on Musk’s compensation plan and other proposals by 11:59 p.m. ET on November 5. The pay package, unveiled by Tesla’s board in September, links Musk’s compensation to ambitious corporate milestones. However, the plan faces significant opposition. Institutional Shareholder Services (ISS), the largest proxy advisory firm globally, has recommended shareholders vote against the package, describing its value as “astronomical.” Similarly, Glass Lewis has expressed reservations but defers the final decision to shareholders. Last week, a coalition of unions and corporate watchdog groups launched the “Take Back Tesla” campaign opposing the package, citing concerns about Musk’s political affiliations and public controversies that could harm Tesla’s reputation.
During a recent earnings call, Musk criticized proxy advisors ISS and Glass Lewis as “corporate terrorists,” a remark ISS publicly defended by reaffirming their independent analysis role.
Structure and Milestones of Musk’s Compensation Plan
Musk’s pay package consists of 12 tranches of stock awards, each contingent upon Tesla achieving predetermined market capitalization and operational milestones. The first tranche activates if Tesla reaches a market cap of $2 trillion, compared to its current valuation near $1.5 trillion.
- Subsequent tranches unlock as market cap rises in increments of $500 billion, up to $6.5 trillion.
- The final two tranches require market capitalization milestones of $7.5 trillion and $8.5 trillion.
- Operational targets include delivering 20 million vehicles, securing 10 million active FSD subscriptions, deploying 1 million robots, and operating 1 million robotaxis commercially.
- Financial goals include adjusted EBITDA milestones ranging from $50 billion to $400 billion.
According to Reuters, Musk could earn tens of billions by meeting only a subset of these targets, underscoring the package’s lucrative nature. In addition to compensation, the plan would increase Musk’s voting power significantly, potentially boosting his stake from 13% to approximately 25%, a move Musk has publicly advocated to secure influence over Tesla’s AI initiatives.
Denholm explained, “It’s less about compensation and more about the voting influence to ensure that bad outcomes, particularly related to AI, can be prevented.”
Insights from Denholm’s CNBC Interview
- Pay Package Rationale: Economic value from the pay plan is structured to benefit shareholders earlier than Musk, incentivizing his long-term commitment.
- Roadster Outlook: The new Tesla Roadster remains on the company’s roadmap.
- AI and Autonomy Focus: Tesla is intensifying its Full Self Driving efforts, integrating AI with purpose-built autonomous vehicles.
- xAI Stake Proposal: Shareholder-submitted proposals on Tesla taking stakes in Musk’s xAI project will be voted on separately.
- Optimus Robot Progress: Denholm described Optimus as highly mobile and dexterous, capable of simple tasks such as folding laundry and interacting physically with humans.
Denholm also noted retail investors comprise about 30% of Tesla’s shareholder base, with last year’s vote seeing record participation.
FinOracleAI — Market View
Tesla stands at a pivotal juncture, balancing shareholder concerns over governance and compensation with the strategic imperative of retaining Elon Musk’s visionary leadership. The proposed pay package is unprecedented in scale and scope, reflecting the company’s ambitions in AI, autonomous vehicles, and robotics.
- Opportunities: Retaining Musk could accelerate Tesla’s leadership in AI-driven automotive innovation and robotics, potentially unlocking substantial long-term shareholder value.
- Risks: The massive pay package may alienate shareholders and proxy advisors, risking reputational damage and governance challenges.
- Governance Concerns: Increased voting power for Musk raises questions over checks and balances, especially given the sensitive nature of AI development.
- Market Reaction: Investor sentiment remains mixed, with Tesla’s recent earnings missing expectations despite revenue growth.
Impact: The shareholder vote outcome will critically influence Tesla’s strategic direction and leadership stability. Approval could embed Musk’s control and incentivize ambitious growth, while rejection risks leadership disruption and market uncertainty.
