Tesla’s shareholders have endorsed a substantial new pay package for CEO Elon Musk, totaling around $1 trillion.
This plan, approved by over 75% of shareholders, grants Musk approximately 423 million shares of the electric vehicle company. If the firm meets certain milestones, the shares could yield nearly $1 trillion, potentially making Musk the world’s first billionaire.
This decision marks a significant win for both Musk and Tesla’s board. They’ve faced objections from some key advisers and shareholders yet argue that Musk requires this incentive to maintain his focus on the company.
When Tesla revealed the proposal back in September, it emphasized the importance of Musk’s role in ensuring the company’s ongoing success and growth, suggesting he needs to remain engaged with Tesla’s vision.
The concern about his attention to the company grew this year when Musk took on a role in the Trump administration, overseeing the Department of Government Efficiency (DOGE).
Initially, Tesla investors were hopeful about Musk’s connection with President Trump post-2024 election. However, his government involvement turned out to substitute for some contentious aspects of his work at DOGE, ultimately complicating things for Tesla.
Musk distanced himself from that administration role in late May, yet remained a focal point in political discussions, openly challenging the president and declaring a new political party.
Recently, he’s kept a lower profile as Tesla’s stock rebounded from significant declines in the earlier part of the year.
The board’s compensation plan aims for a market valuation of $8.5 trillion over the next decade. Currently, Tesla’s market size stands at $1.4 trillion, with Nvidia as the only company surpassing $5 trillion.
To fulfill the terms, Tesla must produce 20 million vehicles and 1 million bots, secure 10 million active subscriptions to its fully autonomous driving service, and have 1 million operational robotaxis.
This latest pay arrangement closely resembles Musk’s 2018 deal, which held an original value of around $56 billion. That previous agreement is still tangled in court after being invalidated last year by a Delaware judge.
Opposition to this substantial payout remains vocal. Two prominent proxy advisory firms, ISS and Glass Lewis, advised shareholders to vote against the compensation package. Additionally, Norway’s sovereign wealth fund also dissented, expressing concerns about the total compensation, potential dilution of shares, and inadequate risk mitigation for key executives, which aligns with their stance on executive pay.
