Tesla shareholders approve $1 trillion pay package for Elon Musk

The landmark package strengthens Musk's control over Tesla but faces ongoing scrutiny from proxy advisors and the courts

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The big picture: For Tesla shareholders, the vote represents both a consolidation of Musk's authority and a long-term bet on his ability to sustain dramatic growth across markets – from electric vehicles to autonomous systems and humanoid robotics – over the next decade. It also underscores how closely investors continue to tie Tesla's valuation to Musk's leadership, even as questions about governance, execution risk, and market saturation become increasingly pronounced.

Tesla shareholders have approved a compensation package worth nearly $1 trillion for CEO Elon Musk. Results announced Thursday at the annual shareholder meeting in Austin, Texas, showed that roughly 75 percent of voting shares supported the plan, which ties Musk's pay to ambitious long-term stock and operational milestones.

The new package, introduced by Tesla's board in September, outlines 12 tranches of stock grants that could increase Musk's ownership stake from approximately 13 percent to 25 percent if the company meets a series of performance thresholds. Each tranche is linked to specific market capitalization levels and operational goals extending into the 2030s.

Under the plan, the first tranche will vest if Tesla reaches a market capitalization of $2 trillion, up from its current $1.54 trillion. Subsequent awards are triggered by $500 billion increments in valuation, culminating in a full payout if Tesla achieves an $8.5 trillion market cap. The final two tranches would only unlock through larger, trillion-dollar jumps, representing some of the most aggressive growth targets in corporate compensation history.

Alongside market benchmarks, the package includes profitability milestones starting at $50 billion in annual adjusted profit and rising to $400 billion. In the third quarter, Tesla posted $4.2 billion in adjusted EBITDA, highlighting the gap between current results and these ambitious targets.

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The company must also achieve several aggressive production and technology milestones, including delivering 20 million electric vehicles, reaching 10 million active full self-driving subscriptions, deploying 1 million Optimus humanoid robots, and placing 1 million robotaxis into commercial operation.

Tesla's September proxy filing noted that the plan does not clarify whether FSD subscriptions must be paid for by customers or if free trials are included. Currently, the company markets a system called "FSD Supervised," a partially automated driver-assistance platform in development toward full autonomy. Tesla says its next-generation system is being designed to eliminate the need for in-car human supervision.

During the meeting, Musk highlighted the company's long-term robotics ambitions, describing the Optimus humanoid platform as potentially transformative. He predicted that the technology could surpass smartphones in market significance and play roles in healthcare, manufacturing, and even law enforcement. No production timeline or commercial release target was provided.

The shareholder session also addressed a separate investor proposal led by Stephen Hawk that would allow Tesla to invest directly in Musk's artificial intelligence company, xAI, which he founded in 2023. Brandon Ehrhart, Tesla's general counsel, said the motion received more votes in favor than against, but with a large number of abstentions, Tesla is still considering next steps.

The approval of the pay package follows last year's Delaware Court of Chancery ruling that Musk's 2018 compensation plan was improperly awarded and should be rescinded. Musk has appealed, and the case is now before the Delaware Supreme Court. The adoption of the new plan adds another layer of complexity to Tesla's legal and governance landscape.

Both major proxy advisory firms, Glass Lewis and Institutional Shareholder Services, had recommended that investors oppose the package, citing its size and structure. Supporters on the Tesla board argued that retaining Musk as CEO is essential to maintaining the company's pace of innovation in electric vehicles, energy storage, and artificial intelligence.

Musk continues to juggle leadership roles at multiple companies, including SpaceX, Neuralink, The Boring Company, xAI, and the platform X, which absorbed parts of his earlier ventures. Meanwhile, his political involvement has drawn attention beyond the tech and automotive sectors.

The National Bureau of Economic Research recently estimated that Tesla's US sales between October 2022 and April 2025 may have been 67 percent to 83 percent higher had Musk not engaged in partisan activity.

Despite the controversy, Tesla's newly approved agreement neither restricts Musk's political activities nor requires him to dedicate a minimum amount of time to Tesla operations. The compensation plan also lists a series of "covered events" – including natural disasters, wars, pandemics, or regulatory changes – that could trigger specific stock awards even if operational goals remain unmet.

According to filings with the Securities and Exchange Commission, Musk could still realize more than $50 billion in gains by achieving portions of the outlined milestones, even without fulfilling all performance conditions.

Image credit: Reuters