Image: Tesla
SHAREHOLDERS OF Tesla, an electric-car maker, have approved a $1tn pay award for Elon Musk, its chief executive. The endorsement, by 75% of votes cast, is the largest in corporate history. It reflected a stark dilemma: back the man who might build an artificial-intelligence juggernaut or risk his departure. For most investors, the potential reward outweighed the governance concerns.
The package grants Mr Musk stock if he meets extraordinary goals. Tesla’s valuation must increase sixfold to $8.5tn, its earnings must grow 24 times to $400bn and it must sell millions of humanoid robots and self-driving software subscriptions. Achieving this would raise his stake by 12%, giving him a quarter of the company. He will receive no salary or bonus. The board argues this is the only way to ensure his focus stays on Tesla as it pivots from cars to robotics and AI.
Critics see it differently. Proxy advisers Institutional Shareholder Services and Glass Lewis urged investors to reject the deal, citing its “striking magnitude” and lack of safeguards to prioritise Tesla over Mr Musk’s other ventures, such as SpaceX and xAI. Norway’s oil fund, a big shareholder, voted against, warning of “key person risk”—corporate jargon for over-reliance on one individual. A New York official called it “pay for unchecked power, not pay for performance”.
Yet shareholders, more so retail investors, were swayed by Mr Musk’s appeal. At the annual meeting in Texas, he danced with prototype robots named Optimus and promised a future where AI expands the global economy a hundredfold. His message was that Tesla’s value hinges on his leadership. The company’s chair, Robyn Denholm, reinforced this, suggesting the share price would collapse without him.
The vote also shows a pivot in corporate governance. Tesla recently moved its legal home to Texas, allowing Mr Musk and his brother to vote their combined 16% stake, which was restricted under Delaware law. This proved decisive. The board’s frantic lobbying in the final weeks, which left Ms Denholm hoarse, secured the necessary institutional support.
This is Mr Musk’s second record pay deal in six years. A Delaware court voided a previous $56bn award, ruling the board was too close to the boss. That decision is under appeal. The new package, though larger, is structured similarly. Investors are betting that Mr Musk alone can deliver the science-fiction future he sells. Tesla’s market value, already greater than all other Western carmakers combined, depends on it. The day after the vote, the share price fell 4%. Even his biggest fans seem to know this is a gamble. ■