Elon Musk's Deep Tesla Ties: Is His Trillion-Dollar Pay Package a Win-Win for Him and Investors?

TradingKey - Despite some institutional opposition, Tesla CEO Elon Musk successfully secured his "trillion-dollar pay package" at the 2025 annual shareholder meeting, pledging to contribute to an $8.5 trillion Tesla market valuation goal and an AI and robotics empire. Analysts suggest that Tesla shareholders' record-setting gamble on the CEO's compensation is not only a victory for Musk but also for Tesla investors.

Shareholders overwhelmingly approved Elon Musk's decade-long, trillion-dollar stock-based compensation plan with over 75% of the votes at the highly anticipated Tesla annual meeting held Thursday, November 6, at the Gigafactory in Austin, Texas. The unprecedented sum marks a historic milestone.

To earn the full 423.7 million restricted stock units and increase his equity stake from 12% to his desired 25% or more, Musk must achieve 12 tranches of market capitalization targets and operational or financial performance metrics.

Overall, Musk is tasked with leading Tesla to increase its market capitalization from approximately $1.5 trillion to $8.5 trillion within a decade. Stringent key performance indicators (KPIs) during this period include delivering 20 million electric vehicles, reaching 10 million active Full Self-Driving (FSD) users, commercially operating 1 million Robotaxis, delivering 1 million Optimus robots, and growing adjusted EBITDA by 24 times to $400 billion.

Achieving these ambitious goals will not be easy for Musk, as Tesla currently faces significant challenges, including slowing or declining EV sales growth, low FSD adoption rates, and regulatory and competitive hurdles for Robotaxis.

As Musk earns the 12% stock incentive, the first market capitalization target alone is equivalent to 36 General Motors, while the second target equals 29 Ferraris.

According to Tesla's regulatory filings, the final milestone for Tesla's market cap would be akin to creating 7,500 more unicorn companies, using $1 billion as the benchmark for a unicorn.

【Tesla Market Cap Milestones, Source: Tesla Regulatory Filings】

Tesla Board Chair Robyn Denholm stated that this is not merely an incentive plan but a contract for the future. Retaining Musk is crucial for Tesla's continued innovation.

Denholm previously indicated that if Musk did not receive this pay package or attain his desired company equity, he would likely leave Tesla and develop advanced technologies like AI and robotics at his other ventures.

Musk currently holds key positions at several companies, including rocket company SpaceX, AI firm xAI, social platform X, and brain-interface company Neuralink.

Pay Package Rejection = Tesla Stock Plunge

The Norwegian sovereign wealth fund, CalPERS (the largest public pension fund in the U.S.), investor consortium SOC Investment, and several proxy advisory firms voiced objections to the groundbreaking CEO compensation plan. Their primary concerns centered on the scale of the package, potential stock dilution, and the ambiguity of its terms.

Industry regulator Safe Autonomous Vehicles Everywhere emphasized safety concerns within the operational goals, stating that Musk's pay package effectively creates a dangerous financial incentive to rush partially autonomous vehicles and Robotaxis onto roads before they are proven safe, without adequate safety constraints in the plan's terms.

Nonetheless, considering Musk already holds 15.3% of the voting power, and major shareholders like Vanguard (7.52% stake) and BlackRock (4.02% stake) did not explicitly oppose the plan, the "trillion-dollar pay package" was widely expected to pass.

Krishana Palepu, a Harvard Business School professor, analyzed from a corporate governance perspective that the performance-based agreement between Tesla shareholders and Musk ties his compensation to substantial increases in stock value and requires him to hold his earned shares for five years, aligning with shareholder interests.

Palepu added that Musk indeed has a track record of achieving extraordinary stock price growth, and if he does so again, he will receive maximum compensation.

Since its IPO in June 2010, Tesla's stock has generated returns approaching 35,000%, significantly outperforming the S&P 500's 550% gain over the same period.

David Larcker, a professor at Stanford University's Graduate School of Business, also noted that from a purely economic standpoint, the board's stance on retaining Musk is understandable. He stated that no one wants to witness Musk potentially leaving, triggering a collapse in Tesla's stock price.

Morgan Stanley, prior to the shareholder meeting, predicted that the potential failure of the pay package could be interpreted as a "vote of no confidence" in Musk's leadership, potentially triggering an immediate, significant sell-off of over 10% in Tesla's stock and clouding the company's strategic outlook.

Musk's Victory = Tesla Investors' Victory

Long-time Tesla bull and Wedbush analyst Dan Ives stated that the shareholder vote solidifies Musk's position as a "wartime CEO," poised to lead Tesla through an AI revolution.

Ives asserted that Musk, "Tesla's greatest asset," will continue as leader for the foreseeable future, believing that AI valuation is being unlocked—and the evolution of Tesla toward AI-driven valuation has officially commenced in the next 6-9 months.

Musk declared at the shareholder meeting that this is not just a new chapter for Tesla but an entirely new book. He has repeatedly emphasized that Tesla's future lies in AI and robotics, with 80% of the company's future valuation relying on the Optimus robot.

According to Deepwater Asset Management analyst Gene Munster, this is a win-win for both Musk and Tesla investors: Musk gains the control he desires, signaling his continued commitment to Tesla; investors send a clear message of "we are with you" to Musk, implying that even if Tesla has a challenging quarter, its stock may not be penalized as severely as expected.

One legal professor commented, "What is Tesla worth without Musk or even a part-time Musk? Much less than it is worth now."

Notably, this vote was very likely "a victory for retail investors." Approximately one-third of Tesla's shares are held by retail investors, and roughly half participated in this annual shareholder meeting, becoming a crucial force in the overwhelming approval of the pay package.