Tesla Board Warns: Approve $1 Trillion Musk Pay Package or Risk Losing CEO

TLDR

• Tesla Chair Robyn Denholm warned shareholders that Elon Musk could leave as CEO if his proposed $1 trillion pay package is rejected at the November 6 annual meeting
• The performance-based compensation plan requires Musk to hit ambitious targets including shipping 1 million Optimus robots and reaching an $8.5 trillion market cap by 2035
• The package would increase Musk’s stake in Tesla from 13% to nearly 29% over the next decade
• Proxy advisory firms ISS and Glass Lewis recommended shareholders vote against the package, prompting Musk to call them “corporate terrorists”
• A Delaware court struck down Musk’s previous 2018 pay deal earlier this year for being improperly awarded by directors who weren’t fully independent

Tesla shareholders face a decision next week that could determine whether Elon Musk stays on as CEO. The company’s board chair sent a letter Monday warning that rejecting his $1 trillion compensation package might push him to leave.

Tesla, Inc., TSLA

Robyn Denholm wrote to shareholders ahead of Tesla’s November 6 annual meeting. She described the vote as addressing a simple question about retaining Musk’s leadership.

The proposed pay package would grant Musk 12 tranches of stock options tied to performance targets. These goals include reaching an $8.5 trillion market capitalization by 2035 and shipping 1 million Optimus humanoid robots.

This compensation plan replaces Musk’s 2018 pay deal. A Delaware court struck down that earlier package this year, finding it was improperly negotiated by directors who lacked full independence from Musk.

Voting Control and AI Concerns

The new package would increase Musk’s ownership stake in Tesla from 13% to nearly 29%. Denholm told CNBC that voting influence matters more to Musk than the compensation itself.

Elon Musk has repeatedly stated he wants greater control over Tesla as it expands into robotics and artificial intelligence. He expressed concern about being removed from leadership while building what he called a “robot army.”

Proxy advisory firms ISS and Glass Lewis both recommended shareholders vote against the package. Musk responded by calling them “corporate terrorists” during Tesla’s earnings call last week.

Board Defense and Shareholder Value

Denholm’s letter described Musk’s leadership as critical to Tesla’s success. She warned that without proper incentives, the company could lose his “time, talent and vision.”

The board chair said failing to pass the compensation could cause Tesla to lose value as a transformative force in AI and robotics. She acknowledged Tesla could continue as just another car company but argued shareholders deserve more.

The letter also urged investors to re-elect three long-serving directors who have worked closely with Musk. Tesla’s board has faced years of scrutiny over its relationship with the CEO and questions about its independence.

The compensation plan requires Musk to meet specific milestones in autonomous driving technology. The targets span at least seven and a half years of continued leadership at Tesla.

Denholm framed the vote as essential for aligning Musk’s incentives with shareholder value and long-term growth. The November 6 meeting will determine whether shareholders accept the board’s argument about retaining their CEO.

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