Key Takeaways
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- Tesla shareholders approved a record-setting $1 trillion pay package for CEO Elon Musk, with over 75% of votes in favor.
- The plan could raise Musk’s ownership to 25% of Tesla if he meets ambitious performance milestones.
- Tesla’s board says the award ties Musk’s compensation to market cap, EBITDA, and AI product success, including robotaxis and humanoid robots.
- Institutional investors including CalPERS and Norges Bank opposed the deal, citing its “astronomical” size and governance concerns.
- The approval underscores shareholder faith in Musk’s AI and robotics vision, despite recent sales declines and legal disputes over past compensation.
Record-Setting Vote
Tesla shareholders overwhelmingly approved a new $1 trillion pay package for CEO Elon Musk, cementing his control over the electric vehicle and AI company. More than three-quarters of votes cast supported the plan, which could give Musk control of up to one-quarter of Tesla’s shares if all targets are achieved.
At the Austin shareholder meeting, Musk stood beside humanoid robots and declared,
“What we’re about to embark upon is not merely a new chapter of Tesla’s future, but a whole new book.”
He added, “Hang onto your Tesla stock.”
Incentive Structure
The compensation package divides into 12 tranches of stock options, each tied to milestones such as:
- Market cap goals: From $2 trillion to $8.5 trillion over ten years (up from ~$1.5 trillion today).
- Operational goals:
- Delivering 20 million cars
- Selling 1 million robots or operating 1 million robotaxis
- Achieving $50 billion in EBITDA or 10 million Full Self-Driving subscriptions
Each tranche grants Musk roughly 1% of Tesla’s shares, vesting over 7.5–10 years once targets are hit.
Tesla Chair Robyn Denholm defended the plan as performance-driven:
“What motivates him is doing things others can’t.”
Investor Pushback
Despite broad support, several major funds voted against the package, including CalPERS, New York City’s pension systems, and Norges Bank Investment Management.
Proxy adviser ISS criticized the award’s “astronomical magnitude,” warning that such plans risk misalignment if targets are unachievable or too easily met.
Conversely, Charles Schwab, holding a 0.6% Tesla stake, backed the plan, calling it “aligned with shareholder interests.”
AI and Governance Implications
Tesla’s board also considered a proposal to allow investment in Musk’s AI company, xAI—an effort Musk has said is essential to keeping Tesla competitive in artificial intelligence. While more votes were cast for than against, many abstained, leaving the board to decide next steps.
Musk’s pay package doubles down on his push to make Tesla an AI-first company, spanning robotics, autonomous driving, and humanoid systems.
Legal and Historical Context
The approval follows ongoing litigation over Musk’s 2018 compensation plan, which a Delaware judge struck down for lacking transparency. Tesla has appealed the ruling to the Delaware Supreme Court.
If upheld, the new 2025 award would be the largest CEO compensation plan in corporate history, surpassing Musk’s prior deal.
