Tesla’s board has put forward an extraordinary compensation package for CEO Elon Musk, potentially valued at $1 trillion over a decade, a move poised for shareholder approval despite its unprecedented scale. This proposal, framed by the board as essential to secure Musk’s continued leadership and guide Tesla’s ambitious ventures into artificial intelligence and robotics, highlights the company’s reliance on its visionary chief while raising significant questions about corporate governance and executive accountability.
The genesis of this substantial pay deal traces back to seven months of intensive negotiations. Beginning in February, Tesla’s compensation committee engaged in 37 meetings with legal counsel and 10 with Musk himself. From the outset, Musk’s demands were clear: he sought 25% ownership, full control over Tesla’s strategic direction, and a complete payout from his 2018 compensation package, which a Delaware court invalidated last year.
According to filings, the board expressed concerns that Musk had repeatedly threatened to pursue other interests and potentially leave Tesla, possibly taking key AI talent with him. To mitigate this risk and address the voided 2018 award, the new plan offers Musk 96 million restricted shares upfront, valued at over $31 billion based on recent trading. This stock is subject to a five-year lock-up period and is contingent on the achievement of rigorous performance milestones. The board explicitly stated that should Musk successfully challenge the court’s decision on the 2018 package, he would not receive the new stock payout, thus preventing a “double dip.”
Shareholder Perspectives and Governance Concerns
The proposed compensation has ignited a divided response among investors and corporate governance advocates. Equilar, an executive pay tracking firm, estimates that if all targets are met, Musk’s total compensation could surpass $113 billion by 2025. Courtney Yu, a research director at Equilar, noted that Tesla’s shareholders have historically approved such grants, suggesting that if Musk succeeds, they could see “tremendous value.”
However, significant opposition has emerged. Kristin Hull, founder of Nia Impact Capital, branded the package as “irresponsible,” arguing that such capital could be better deployed in research and development or strategic acquisitions, which would benefit Tesla’s long-term health. Nia Impact Capital is reportedly exploring a joint challenge with other investors. Dan Coatsworth, an investment analyst at AJ Bell, criticized the package as “excessive” and potentially detrimental to corporate governance, adding that Tesla has “lost its edge” and its brand has been “tarnished by Elon’s actions outside of Tesla.” Randi Weingarten, president of the American Federation of Teachers, urged shareholders to reject what she termed a “money grab” and advocate for stronger corporate governance standards.
While the three largest outside investors—Vanguard, BlackRock, and State Street—have yet to disclose their voting intentions, their past actions offer some insight. Vanguard and BlackRock supported Musk’s original $56 billion plan in 2018, while State Street did not.
Strategic Imperatives and Financial Projections
The board’s rationale for this colossal package centers on positioning Tesla as a global leader in robotics and AI. They describe the deal as a “Super Ambitious Incentive Package for a Pioneering, Ambitious and Unique CEO,” asserting that Musk is uniquely capable of unlocking Tesla’s “full potential.” Under the terms of the deal, payouts are structured in 12 tranches, each conditional on specific operational and financial milestones. If all targets are met, Musk’s current 13% ownership in Tesla (or 19.7% including disputed 2018 options) could rise to 25% within seven years. The board projects that successful execution of these goals could see Tesla’s market capitalization soar to $8.5 trillion, surpassing the combined valuations of tech giants like Microsoft, Meta, and Alphabet.
Despite the ambitious projections and the stock’s 3.6% rise to $350.84 on the day the proposal was announced, Tesla’s stock is still down 13% in 2025, reflecting investor unease regarding the company’s struggling electric vehicle business and intensifying global competition. The upcoming annual meeting in November will be a critical juncture, testing the balance between retaining perceived indispensable leadership and upholding shareholder interests amidst growing calls for robust corporate governance.
Michael Carter holds a BA in Economics from the University of Chicago and is a CFA charterholder. With over a decade of experience at top financial publications, he specializes in equity markets, mergers & acquisitions, and macroeconomic trends, delivering clear, data-driven insights that help readers navigate complex market movements.