Tesla is facing a critical juncture as shareholders prepare to vote on CEO Elon Musk's proposed $1 trillion pay package at the annual meeting on November 6. The outcome of this vote could determine Musk's future with the company, with Tesla Board Chair Robyn Denholm warning that rejecting the package could lead to Musk stepping down.
Denholm has strongly urged shareholders to approve the compensation plan, emphasizing that Musk's leadership is "critical" to Tesla's future success, particularly as the company focuses on artificial intelligence, autonomous driving, and robotics. She argues that the pay package is essential to retain Musk for at least another seven and a half years, and that without it, Tesla risks losing his "time, talent, and vision". In a letter to shareholders, Denholm stated that the company must "foster an environment that motivates Elon to achieve great things," or risk losing him. She also asked that shareholders vote to re-elect Ira Ehrenpreis, Joe Gebbia and Kathleen Wilson-Thompson to the board.
The proposed compensation plan would grant Musk 12 tranches of stock options, contingent upon achieving ambitious milestones, including growing Tesla's market capitalization to $8.5 trillion and reaching key goals in autonomous driving and robotics. If these targets are met, Musk's stake in Tesla could increase to at least 25%, giving him approximately 29% voting control of the company.
However, the pay package faces opposition from several groups and advisory firms. Proxy advisory firms like Institutional Shareholder Services (ISS) and Glass Lewis are recommending that shareholders vote against the compensation plan, citing concerns about "excessive dilution" to shareholders, increased control by Musk, and skepticism over the size and structure of the pay plan. ISS stated that while the award aims to retain Musk and keep his attention on Tesla, there are no explicit requirements to ensure this will be the case. Musk has criticized these proxy firms, calling them "corporate terrorists" for their recommendations. He argues that these firms have made "terrible recommendations in the past" that would have been "extremely destructive" to Tesla's future. Denholm has echoed this sentiment, stating that proxy advisory firms "weren't built to evaluate companies like Tesla".
The board's support for Musk remains strong, with Denholm asserting that the plan is designed to keep Musk focused on innovation while maintaining governance discipline. She views the vote as "both an endorsement of Elon's vision and a vote for Tesla's carefully tailored strategy". The board believes that Musk's continued leadership is vital as Tesla seeks to become a global leader in AI and automation solutions.
Some experts and advocacy groups have questioned the board's independence and oversight of Musk's influence. A Delaware court earlier this year struck down Musk's 2018 pay deal, ruling that it was improperly awarded by directors who were not fully independent.
The shareholder vote on November 6 will be a defining moment for Tesla. Approval of the pay package could secure Musk's leadership for the next several years, while rejection could trigger a leadership shake-up with potential implications for Tesla's market performance and strategic direction.
