On November 6, at the shareholders’ meeting of the electric car giant Tesla, a compensation package of nearly one trillion dollars for CEO Elon Musk was approved with over 75% of the votes. If Musk can achieve his promised goals, his ownership stake will increase from the current 13% to 25%, thereby controlling a quarter of Tesla’s shares.
Following the meeting, various media outlets rushed to report and experts provided insights on the news. With Musk’s foresight and exceptional sales ability, Tesla’s market value has soared to $1.4 trillion, surpassing the combined market value of all other Western car manufacturers. The valuation of Tesla largely hinges on optimistic expectations of Musk’s ability to successfully transition to artificial intelligence and deploy millions of self-driving taxis.
During the impromptu speech at the shareholders’ meeting that night, Musk outlined his vision for the future: a world dominated by artificial intelligence, filled with autonomous vehicles, and a Tesla army of robots capable of performing surgeries more accurately than humans and even “eliminating poverty.” “This will be the largest product ever,” he said, “Optimus (Tesla’s robot) is like an infinite money loophole.”
The annual shareholders’ meeting marked a conclusion to a turbulent 12 months for Tesla and its energetic CEO. Elon Musk has amassed a fortune of $460 billion through his vast business empire, including SpaceX and xAI.
On Friday, analysts and experts with various perspectives offered comments:
“The one trillion dollar CEO compensation plan is indeed staggering—yet the equally astounding high targets that Tesla must climb, akin to Mount Everest, to unlock this reward are remarkable as well. For shareholders, this is the ultimate interest alignment: if Musk fails to create remarkable value, he gets nothing; but if he truly accomplishes this nearly impossible task, investors will own a giant valued at $8.5 trillion.”
“2026 will be a watershed year… Critics accuse this of being ‘key man risk,’ they are not wrong, but the market has spoken—’Musk premium’ still exists and remains strong.”
“Undoubtedly, Musk has the ability to accomplish ‘impossible tasks’ in the business world… given the declines in Tesla’s electric car business, we are surprised he did not choose to leave and instead focused on his private enterprises. Just this fact alone is enough for shareholders to deem this compensation plan worthy.”
“However, for a company with a market value of $1.5 trillion to award a one-trillion-dollar compensation to the world’s richest individual, is unlikely to have a good ending.”
“If this is based on performance stock options, it does not mean that this compensation must be immediately paid out. If he can indeed increase the company’s market value to $8.5 trillion, the problem will naturally resolve itself. Thus, I am not particularly concerned about how the company will pay this money.”
“The board has taken some measures. But the real question is: where does Musk’s focus lie? Achieving these ambitious goals requires extreme focus, and whether he can continue to juggle so many things simultaneously, is another question.”
“The reason shareholders approved this plan is logical. To achieve this astronomical goal, Musk must meet extremely rigorous performance benchmarks. In this sense, for most Tesla shareholders, approving this plan entails almost no loss. If Musk ultimately receives this one trillion dollars, shareholders will also undoubtedly profit handsomely.”
“Musk is an extraordinary figure, isn’t he? Indeed, he is. But does Tesla’s stock price reflect a reasonable earnings multiple? Not quite. Tesla’s valuation is evidently built on a belief—something extraordinary will happen in the future. The question is: is such hope worth shareholders coming up with one trillion dollars? I believe it is not.”
On the other hand, the largest shareholder publicly opposing the plan—the Norwegian Sovereign Wealth Fund, one of Tesla’s top ten shareholders holding a 1.1% stake, believes the “reward amount is too large,” diluting existing shareholders’ equity and failing to address “key man risk.”
New York State Comptroller Thomas DiNapoli stated, “This is a reward for unchecked power, not for performance.” He was involved in leading the opposition to the proposal. “The board is rewarding this behavior of divided attention, and reinforcing the position of an unconstrained CEO.”
However, most investors stand with Musk.
A team including Chairman Robyn Denholm, CFO Vaibhav Taneja, and General Counsel Brandon Ehrhart, last week in New York for interviews and meetings with major investors, sought their support. They cautioned that without Musk, the future of this car manufacturer would be bleak.
(This article referenced reports from the Financial Times and Reuters)