Ahead of its Annual General Meeting (AGM) on Thursday, Tesla is seeking shareholder approval for a substantial compensation package for CEO Elon Musk. The proposed deal, which is not a direct salary, would grant Mr. Musk 423.7 million new shares if the company reaches specific market valuation and operational targets, potentially valuing the award at nearly $1 trillion. This vote follows a previous compensation package for Mr. Musk that was rejected by a Delaware judge and is currently under judicial review. The proposal has generated discussion among shareholders, with some supporting it and others expressing criticism regarding the company's focus.
Proposed Compensation Package Details
The compensation proposal for Mr. Musk is tied to performance metrics rather than a fixed salary. Under the terms, Mr. Musk would receive 423.7 million new shares upon achieving specific company milestones. These targets include increasing Tesla's market value to $8.5 trillion, up from $1.4 trillion at the time of writing, and successfully launching one million self-driving "Robotaxi" vehicles into commercial operation. If these benchmarks are met, the new shares would be valued at nearly $1 trillion. Tesla has promoted the package through digital advertisements and a video on Votetesla.com, featuring board chair Robyn Denholm and director Kathleen Wilson-Thompson. Tesla did not provide comment on its strategy for garnering shareholder support.
Shareholder Perspectives
Mr. Musk has used his social media platform, X, to highlight supporters of the proposal, including Dell Technologies CEO Michael Dell, Ark Invest CEO Cathie Wood, and his brother Kimbal Musk, a Tesla board member. Kimbal Musk stated, "There is no one remotely close to my brother," in support of his leadership.
Conversely, Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management, has criticized the company's approach. Mr. Gerber remarked on the company's expenditure on advertising for a pay package while experiencing declining sales. He has reduced his Tesla holdings in recent years and advocates for the company to refocus on electric vehicle sales.
Historical Context and Legal Review
This proposal is not the first significant compensation package for Mr. Musk. Tesla shareholders previously approved a package that awarded him shares after the company achieved a tenfold increase in its market value. Although Mr. Musk met this milestone, a Delaware judge rejected that deal in 2024. The judge cited concerns that Tesla's board members were too personally and financially connected with Mr. Musk. That judicial decision is currently under review by the Delaware Supreme Court, even as deliberations proceed on the new, larger compensation package.
Dorothy Lund, a professor at Columbia Law School, characterized Tesla's current shareholder outreach campaign as "not normal" for a compensation decision. She noted that "get-out-the-vote" campaigns are more typically associated with companies facing activist shareholder demands regarding operational or board changes.
Voting and Governance
The Annual General Meeting will include a vote on this compensation package. Both Elon and Kimbal Musk are eligible to cast votes on the current proposal, a change from the procedures for the earlier compensation package. Mr. Musk is currently recognized as the world's richest individual. Protests against Mr. Musk and Tesla have occurred in various cities across the US.