Tesla shareholders grant Musk US$1 trillion pay deal, the world’s largest

NEW YORK – Mr Elon Musk has secured the largest compensation package in history – approaching US$1 trillion (S$1.3 trillion) – by daring Tesla shareholders to sack him or vote to give him a pay hike. 

The eye-popping package,
approved in a thumping vote by Tesla shareholders on Nov 6, will mint the world’s first trillionaire.

But the money and the bragging rights are not the point if you ask Mr Musk, 54, who was already the world’s richest man before his pay jump. 

He has said he needed to own enough shares in Tesla, an electric vehicle (EV) company he founded, to remain in the driving seat. He currently owns about 500 million shares or about a 15 per cent stake. 

The proposition before the shareholders was that only a trillion-dollar package would keep Mr Musk interested enough to keep on achieving “impossible things” at Tesla which is widely considered America’s most innovative company.

At their annual general meeting (AGM) at Tesla’s Gigafactory in Austin on Nov 6, more than 75 per cent of shareholders voted in favour, with some reservations voiced by institutional holders. Texas’ corporate-friendly laws allow Mr Musk to vote on his own pay. 

With that, he will eventually come to own over 25 per cent of Tesla’s stock, to be awarded in 12 batches provided he delivers on some extraordinary key performance indicators. 

The biggest target is that Tesla must reach a market capitalisation of US$8.5 trillion over a 10-year period. Its current market valuation is about US$1.45 trillion – more than that of other leading US carmakers GM and Ford combined

The other targets he must meet are to raise Tesla’s earnings by 24 times to hit US$400 billion and sell 20 million EVs, 10 million autonomous driving subscriptions and a million units of his humanoid robot Optimus.

Plus, have at least a million robotaxis in commercial operation. 

As he meets his targets, his stake in Tesla will expand. But it comes with restrictions. He cannot sell his shares for up to 10 years and will get no salary and no bonus either.

Mr Musk has sold eight million EVs thus far and will not be penalised if there are wars, pandemics or changes to laws and regulations that prevent him from achieving the targets.

Is it a fair deal for the shareholders and will it motivate Mr Musk to work harder? 

Consider that the world’s most valuable company Nvidia, the designer of advanced AI chips, is worth US$4.83 trillion. Its founder and chief executive Jensen Huang holds a 3.5 per cent stake and is paid a comparatively paltry US$50 million annually.

But Tesla’s fortunes have swung wildly over the past year. Its profits and sales plunged after Mr Musk took on a controversial cost-cutting role in the Trump administration, leading the Department of Government Efficiency. 

His political alliance with Mr Trump hurt the sales of Tesla, which continues to dominate the EV market in the US but lost currency with liberals and Democrats. 

Like other US companies, his firm was hurt by Mr Trump’s tariffs which impact inputs used by carmakers. Additionally, it was affected by Mr Trump’s decision to end subsidies for EVs.

Globally, Chinese EV giant BYD leads in total revenue and total EV vehicle sales in 2025, including hybrids. But Tesla is believed to retain the edge in profitability.

In September, while discussing the company’s quarterly outlook, Mr Musk urged shareholders to approve his request for more Tesla shares, saying he wanted enough voting control “to give a strong influence, but not so much that I can’t be fired if I go insane”.

He added that there was no other way for him to increase his voting control because Tesla was a public company and rules prevented changing ownership structures after a company listed on the stock market.

The problem was unique to him, he said. The founders of Google and Meta, for example, had retained enough control before going public and did not face the issue, he noted.

“I just don’t feel comfortable building a robot army here… and then being ousted because of some… recommendations from ISS and Glass Lewis, who have no freaking clue,” he said.

Institutional Shareholder Services (ISS) and Glass Lewis are advisory firms which counsel investors on how to vote in shareholder meetings.

“The core problem here is that so many of the index funds, the passive funds, vote along the lines of whatever Glass Lewis and ISS recommend,” Mr Musk said in September. 

“Now, they have made many terrible recommendations in the past that, if those recommendations had been followed, would have been extremely destructive to the future of the company,” he added.

The shareholders seemed to have agreed with that assessment despite the fact that some of Tesla’s largest shareholders declared their opposition before the AGM.

Norway’s US$2 trillion sovereign wealth fund – one of Tesla’s top shareholders – said it would vote no, citing concerns over “the total size of the award, dilution and lack of mitigation of key person risk”.

Smaller investors, including Mr Ron Baron and Ms Cathie Wood of Ark Invest, said they would vote in favour. 

“Elon is the ultimate ‘key man’ of key man risk,” Mr Baron tweeted on X. “Without his relentless drive and uncompromising standards, there would be no Tesla.”

Tesla board chair Robyn Denholm championed Mr Musk’s demand, warning the company’s shareholders in a letter that they could lose Mr Musk to his other entrepreneurial pursuits.

“If we fail to foster an environment that motivates Elon to achieve great things through an equitable pay-for-performance plan, we run the risk that he gives up his executive position, and Tesla may lose his time, talent and vision, which have been essential to delivering extraordinary shareholder returns,” Ms Denholm added.

That danger seems to have passed.

Now Mr Musk has to work to earn that trillion-dollar pay. 

His net worth of around US$460 billion – almost US$150 billion more than that of Oracle chief executive Larry Ellison who is the second richest person in the world – comes largely from his holdings in Tesla (around US$340 billion). 

So much is at stake for Mr Musk. Maybe his humanoid robot army will help.