Tesla’s board of directors issued a stark warning to shareholders today: approve Elon Musk’s unprecedented $1 trillion pay package or risk losing him as CEO. It’s a familiar threat, one that the board has used before, and if history offers any clues, it’s likely to work again.
Tesla’s executive team is in full lobbying mode in the run-up to the November 6th annual shareholder meeting, urging shareholders to approve their proposal to make Musk, already one of the world’s richest people, even more unfathomably wealthy. If they don’t, they are warning that he could leave the company for greener pastures.
“Without Elon, Tesla could lose significant value, as our company may no longer be valued for what we aim to become: a transformative force reimagining the fundamental building blocks of mobility, energy and labor, with products such as FSD and Optimus, and working to better humanity in the process,” Tesla’s board chair Robyn Denholm said in a letter to shareholders on Monday.
It was essentially, beat for beat, the same argument she made last year, when shareholders were being pressured to approve a $55 billion pay package for Musk. At the time, it was the largest compensation package ever considered for a CEO — one, of course, that has since been dwarfed by the current payday proposal.
Shareholders approved the $55 billion payout, and they are likely to do the same next month, despite serious misgivings among the corporate governance class. Proxy firms Institutional Shareholders Service (ISS) and Glass Lewis both recently issued guidance advising shareholders to reject the package, calling it too large and unduly influenced by a board that has been shown in court to be captured by Musk. For his part, Musk called the proxy firms “corporate terrorists” during Tesla’s earnings call last week.
The stakes are high, given the current status of Musk’s compensation. Last year, a Delaware court voided Musk’s pay package, valued at more than $50 billion, arguing that the deal was flawed and unfair to shareholders and that Musk held undue influence over its composition. Shareholders had voted twice to approve the hefty compensation, but the judge still upheld her ruling blocking it. Tesla has appealed the decision to the Delaware Supreme Court. In response, Musk orchestrated a vote to move the company’s incorporation to Texas, which doesn’t have the decades of corporate legal precedence like Delaware.
Tesla’s board is likely feeling confident in the outcome of the November 6th vote. Musk has bought some of the company’s stock, and Denholm is giving rare interviews to get out the vote. Tesla’s third quarter sales are up, thanks to consumers eager to claim the expiring $7,500 tax credit. If they want a win, the time is now. Tesla’s earnings are likely to grow much worse in the quarters to come; Musk himself has admitted this. No more tax credit — which Musk shares some of the credit in eliminating — will mean fewer sales. If Tesla wants to become the AI and robotics company that Musk has promised, now is the time.
Denholm’s letter ignores most of these challenges. Musk’s political side projects, his support for President Donald Trump, his spearheading of DOGE, his support for Europe’s far right parties, his Nazi salutes at Trump inauguration, his decision to let election deniers and white supremacists back on X… naturally, Denholm doesn’t engage with these. But by ignoring them, she is doing shareholders a disservice.
The Elon of it all aside, the same problems will persist for Tesla. The company’s lineup is aging, its competition is growing, and it has yet to show that it’s approach to self-driving will give it the advantage. Regulatory credits are about to disappear. And tariffs continue to take a bite out of the company’s bottom line.
Rather than present a plan for the future, Tesla’s board is urging shareholders to double down on more of the same.
