Tesla’s board chair is defending a massive pay package for CEO Elon Musk that could be worth up to $1 trillion. Robyn Denholm says the compensation is necessary to keep Musk leading the company for the next decade. She’s worried that if shareholders reject the deal, Musk might leave Tesla.
The pay package is structured as 12 equal stock awards tied to specific goals. Tesla would need to reach an $8.5 trillion market value for Musk to receive the full amount. That’s a more than 500% increase from Tesla’s current value. The package could increase Musk’s ownership stake from 13% to nearly 29% of the company.
Denholm argues that Musk’s vision is critical for Tesla’s future, especially in developing autonomous vehicles and robots. She claims rejecting the package risks losing significant company worth and growth potential. In a letter to shareholders, she warned that Musk’s concerns about maintaining influence over robotics development drove this proposal. Tesla currently faces declining sales and lost market share, which some analysts attribute to competitive pressures in the electric vehicle industry. The plan’s additional goals involve advancements in autonomous driving and robotics to position Tesla as an innovation leader. Full approval of the compensation would require shipping 1 million Optimus robots by 2035 to unlock the entire payout.
Musk’s vision for autonomous vehicles and robotics is essential to Tesla’s future success and competitive advantage.
Musk himself has stated that his main worry isn’t personal wealth. Instead, he wants decision-making power over the “robot army” development. He’s uncomfortable building robotics without strong voting influence. He’s also framed the package as protection against being ousted by proxy advisory firms like ISS and Glass Lewis. Musk has expressed particular concern about losing control of Tesla’s artificial intelligence and robotics initiatives, which he views as fundamental to the company’s competitive advantage.
The performance targets have drawn criticism. Some analysts say they’re easier to meet than the board claims. The minimum threshold allows partial payouts when Tesla reaches just $50 billion in adjusted income. Critics also question whether the operational and financial goals guarantee actual shareholder worth.
Major proxy advisory firms ISS and Glass Lewis both recommend shareholders vote against the package. They cite concerns about board independence and excessive compensation levels. Denholm harshly criticized these firms, calling them “corporate terrorists” for trying to block the deal.
This situation echoes Tesla’s past governance troubles. In 2018, a Delaware court voided Musk’s previous pay package due to improper negotiation. Tesla’s board composition has also faced scrutiny for its close ties to Musk.
Shareholders will vote on the package November 6 at Tesla’s annual meeting. The board claims approval could help Tesla become the world’s most esteemed company.