Ask Onix
Tesla Shareholders Greenlight Record $1 Trillion Pay Deal for Elon Musk
Tesla shareholders overwhelmingly approved a historic compensation package for CEO Elon Musk on Thursday, potentially worth nearly $1 trillion (£760 billion) if ambitious performance targets are met over the next decade. The deal, backed by 75% of votes at the company's annual general meeting in Austin, Texas, was met with prolonged applause and celebratory chants from attendees.
Under the agreement, Musk-already the world's wealthiest individual-must propel Tesla's market value from its current $1.4 trillion to $8.5 trillion while achieving milestones such as deploying 1 million self-driving Robotaxi vehicles commercially. Success would unlock hundreds of millions of new shares, though critics have slammed the package as excessive. Tesla's board countered that rejecting the deal risked Musk's departure, a scenario they claimed the company could not afford.
Musk's Vision: Robots Over Cars
In his post-vote remarks, Musk framed Tesla's future as "not merely a new chapter, but a whole new book," emphasizing projects like the Optimus humanoid robot-a pivot that disappointed some analysts hoping for a sharper focus on reviving Tesla's flagging electric vehicle (EV) sales. Gene Munster, managing partner at Deepwater Asset Management, noted on X (formerly Twitter) that Musk's priorities were clear: "His vision of the 'new book' starts with Optimus. No mention of cars, FSD [Full Self-Driving], and robotaxi yet."
Later in the meeting, Musk briefly addressed Tesla's Full Self-Driving (FSD) technology, claiming the company was "almost comfortable" allowing drivers to "text and drive essentially." The remark comes as U.S. regulators investigate FSD following multiple incidents, including crashes caused by vehicles running red lights or driving on the wrong side of the road.
Investor Divide: Retail Backing vs. Institutional Skepticism
The pay package faced opposition from heavyweight institutional investors, including Norway's sovereign wealth fund (the world's largest) and CalPERS, the biggest U.S. public pension fund. Their dissent left Musk reliant on Tesla's unusually large base of retail investors, who ultimately secured the deal's passage. Musk and his brother Kimbal, a Tesla board member, were also permitted to vote-a point of contention for corporate governance experts.
Ross Gerber, CEO of investment firm Gerber Kawasaki and a Tesla shareholder, called the deal "another notch in the unbelievable things you see in business." He cited concerns over Tesla's struggling financial performance, intensifying competition in the robotaxi sector from rivals like Waymo, and the uncertain market demand for humanoid robots. Gerber added that his firm had reduced its Tesla stake due to the "polarisation of [Musk's] persona," which he argued had "demolished the value of the brand."
"Elon seems to be divorced from the reality that his opinion among the public is so low."
Ross Gerber, CEO, Gerber Kawasaki
Legal Hurdles and Board Lobbying
The vote follows a contentious legal battle over Musk's 2018 pay package, which a Delaware judge voided in January, ruling that Tesla's board-deemed too closely tied to Musk-had failed to justify its fairness. Tesla has since reincorporated in Texas, and the Delaware Supreme Court is reviewing the decision. In the lead-up to Thursday's meeting, Tesla's board launched a public campaign to rally support for the new deal, including a video featuring board chair Robyn Denholm and director Kathleen Wilson-Thompson praising Musk's leadership.
Kathryn Hannon, investment manager at RBC Brewin Dolphin, noted the deal would grant Musk "increasing voting power over the company," a long-sought goal. "Elon Musk, whether you like him or not, he is a visionary in this space," she said, adding that aligning his incentives with shareholders' could drive future success.
Market Reaction and Challenges Ahead
Tesla's shares inched higher in after-hours trading, capping a 62% surge over the past six months. However, the company's sales have slumped since Musk's public alignment with former U.S. President Donald Trump-a relationship that collapsed earlier this year. Analysts like Dan Ives of Wedbush Securities, a longtime Musk supporter, argued the CEO remains Tesla's "biggest asset" and predicted the deal would unlock further value tied to AI advancements.
Ann Lipton, a law professor at the University of Colorado, acknowledged the uncertainty of Musk hitting the new targets but noted he had "hit those milestones ahead of schedule" in 2018. She added that while Musk's political activities have polarized public opinion, the pay package imposes "no constraints on his activities" outside Tesla.
Key Milestones for Musk's Payout
- Market value growth: Increase Tesla's valuation from $1.4 trillion to $8.5 trillion.
- Robotaxi fleet: Deploy 1 million self-driving vehicles commercially.
- AI and automation: Advance Tesla's Optimus robot and Full Self-Driving (FSD) technology.
