In the recent Tesla earnings call, CEO Elon Musk made headlines with his comments on a controversial $1 trillion pay package. His passionate remarks centered around concerns about maintaining sufficient voting power to shape the company’s future regarding artificial intelligence (AI) and robotaxi initiatives. Musk’s framing of the issue as more than just compensation reflected his urgency in securing influence at Tesla.
Details from the Earnings Call
During the call, Musk expressed discomfort over potential challenges to his authority, labeling proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis as “corporate terrorists.” He emphasized his need for a voting power in the “mid-20s” percentage to ensure he maintains a strong influence while still allowing for accountability in his leadership.
Voting on the Pay Package
Shareholders are set to vote on Musk’s compensation proposal on November 6. If approved, the package could yield Musk up to $1 trillion in stock contingent upon achieving substantial performance targets. These include:
- Boosting Tesla’s market value to $8.5 trillion
- Selling 12 million cars
- Delivering one million humanoid robots
- Launching one million robotaxis
- Increasing adjusted earnings from $16.6 billion in 2024 to $400 billion
Should the proposal pass, Musk’s ownership stake in Tesla could escalate from 13% to nearly 29%, enhancing his control over the company.
Potential Changes if the Package Fails
Tesla’s board has warned that rejecting this pay package might lead Musk to decrease his involvement with the company, possibly stepping away entirely. There is notable division among investors. While proxy firms ISS and Glass Lewis recommend voting against some aspects of the proposal, influential supporters like Ark Invest’s Cathie Wood believe it will secure decisive approval.
Previous Controversies
The discussion surrounding Musk’s pay is not new. It initially began when a Delaware judge rejected his 2018 compensation plan valued at $56 billion. The judge asserted that Tesla’s board had been improperly influenced by Musk during its approval.
Despite the previous setbacks, Tesla pushed to reaffirm the pay package, arguing it was crucial for Musk to maintain focus on the company. In June 2024, shareholders ultimately approved his pay package.
Criticism and Support
Critics argue that Musk’s pay plan affords him excessive control without sufficient checks. Some also question whether his ventures into AI and humanoid robotics distract from Tesla’s core focus on electric vehicle production. In contrast, key supporters advocate for the economic logic of the pay package, citing its potential benefits to the company’s future.
Conclusion
As the vote approaches, all eyes will be on the Tesla shareholders and their decision. The outcome not only affects Musk’s future with the company, but also sets a precedent for executive compensation packages in corporate America.
