Tesla board urges shareholders to back Musk’s $1T pay plan, warns he could walk away

Tesla’s board chair, Robyn Denholm, is pushing shareholders to approve CEO Elon Musk’s nearly $1 trillion pay package as they wait to vote during the company’s annual meeting on November 6. She threatened to block Musk’s exit if the pay package is rejected, asserting that Musk is crucial for the EV maker’s future in full autonomous driving and robotics, particularly in relation to the project Optimus.

Denholm argued that the company needs Musk to remain CEO because it is in a transformative stage and leaning more toward AI for EVs and robotics. She added that the board agreed on Musk leading the company’s ambitions and gave him the driver’s seat. 

The board chair disclosed that a special committee is working to determine the proper incentive program to motivate Musk to deliver what she called unprecedented shareholder value over the next decade. However, she clarified that it is more about performance than compensation per se.

Denholm warns Musk could walk away with nothing 

Defending the decision, the board chair emphasized that it is more of a performance plan. Still, he cautioned that Musk risks getting nothing if he fails to meet the operational and market cap milestones. She further explained that the CEO should not expect any equity or salary unless he achieves the specific milestones, which are the basis of the performance plan. 

Meanwhile, the proposed pay package grants Musk approximately 12 tranches of stock options tied to bold targets, including milestones in robotics, one million robotaxis, one million Optimus humanoid deliveries, and a market capitalization of $ 8.5 trillion. Egan-Jones Proxy Services, which sides with Tesla’s board, said the potential payout is justified within this framework. It also disclosed that it will support the 2025 CEO Performance Award under its Wealth Focus Policy, prioritizing pay-for-performance alignment and shareholder return.

The proxy voting provider also explained that Musk must stay at Tesla for at least seven and a half years to qualify for the full award. It reiterated that Musk would walk away with nothing if he failed to meet the specific milestones, but both he and the shareholders would benefit significantly from his success. 

However, the firm cautioned that Musk’s equity ownership could surge to 28.8% if the plan succeeds, reducing the influence of other shareholders. It also noted the enormous gap between Musk’s potential income and that of regular employees, warning that it could impact morale and trigger unforeseen long-term risks. 

Musk calls the ISS corporate terrorists

The CEO slammed the Institutional Shareholder Services (ISS) and Glass Lewis, claiming that the two proxy advisors are just corporate terrorists hell-bent on ousting him, but do not have a clue.

Both have opposed the pay package proposal, citing concerns about limited board flexibility and excessive dilution of their shares. Egan-Jones also surprisingly stated that it would vote against the pay package under its environmental, social, and governance (ESG) and accountability policies, aligning with Glass Lewis and the ISS, both of which complained that the payout is extraordinarily high.

However, Musk believes he is still the right person to lead Tesla into the future, and shoots back at the skeptical investors, accusing them of failing to see what is coming. Denholm also accused the ISS and Glass Lewis of misunderstanding Tesla’s unconventional strategy. She encourages the shareholders to ignore the recommendations of both proxy advisors on all proposals for this year’s Annual Meeting vote. The Tesla board chair said the plan is an investment, not dilution.

“If you prefer that Tesla turn into just another car company mired in the ways of the past, then you should follow ISS and Glass Lewis.” 

–Robyn Denholm, Board Chair at Tesla

Meanwhile, Musk will be allowed to vote on the upcoming proposal, unlike in the 2018 compensation plan, which the ISS and Glass Lewis still opposed. The Tesla CEO has long criticized the proxy advisory industry, accusing Glass Lewis and the ISS of exerting too much influence, and has even mockingly referred to the ISS as ISIS in previous social media posts.

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