Tesla says Musk should be paid $1tn

Ahead of Tesla’s annual general meeting (AGM) on Thursday, the electric car maker had an important message to share with shareholders: The boss is worth $1 trillion.

As Votetesla.com runs digital ads to defend Elon Musk’s proposed high pay package, Votetesla.com features a video of executive chairman Robyn Denholm and director Kathleen Wilson-Thompson praising him as triumphant music climaxes in the background.

But it’s not clear that everyone is chanting the same hymn, which means the General Assembly in Austin, Texas, will become a referendum on Musk following a political turn to the right that has made him one of the most polarizing chief executives in recent memory.

Musk turned to his X to raise the bar even further, saying Tesla’s fate could “affect the future of civilization.”

He also used his social media megaphone to amplify some of the deal’s high-profile backers, including Dell Technologies’ Michael Dell, Ark Invest CEO Cathie Wood and his brother Kimbal, who sits on the Tesla board.

Kimbal praised his brother’s leadership qualities and said, “There is no one remotely close to my brother.”

“Thanks bro ❤️,” Musk replied.

Not everyone agrees.

For some, the focus on Musk and his salary soap opera is symptomatic of what the car company is like. seeing the sales slide – lost its way under his leadership.

“What’s surprising to me is that a company that’s struggling to sell cars is spending money on advertising to sell a pay package,” said Ross Gerber, CEO of Gerber Kawasaki Asset and Investment Management.

Mr. Gerber has reduced his Tesla holdings in recent years and expressed criticism of the direction the company is heading.

“[Tesla] “The company needs to shift its focus back to electric vehicle sales,” he said.

The deal Tesla wants shareholders to support is not a salary with twelve zeros behind it.

Instead, it sets Musk a goal of increasing Tesla’s market value from $1.4 trillion to $8.5 trillion as of this writing.

At the same time, the company would have to oversee the massive increase in self-driving “Robotaxi” cars and ensure that a million of them enter commercial operation. overwhelming launch.

Doing so, in addition to meeting other criteria, will give Musk 423.7 million new shares, which would be worth approximately $1 trillion if the target valuation is reached.

Tesla did not respond to the BBC’s requests for comment on its strategy to garner support from shareholders.

Of course, this isn’t the first salary dispute involving Musk and Tesla.

Previously, Tesla had twice gotten shareholders to approve a pay package worth tens of billions of dollars if Mr. Musk increased Tesla’s market value tenfold.

He reached that milestone, but a Delaware judge in 2024 refused the deal On the grounds that Tesla’s board members are too closely intertwined, personally and financially, with the company’s boss.

The Delaware Supreme Court is reviewing this decision as negotiations continue over this even larger pay package.

Dorothy Lund, a professor at Columbia Law School, told BBC News: “Tesla’s strategy is much the same; that doesn’t mean it’s normal. Nothing about Tesla is normal.”

“They are not the poster child for good corporate governance.”

Professor Lund said opt-out campaigns like this sometimes happen when a company is concerned. It’s about an activist shareholder being forced to make significant changes to the way it operates, such as who sits on the board.

“[But] “Never in my life have I seen anything like this happen in the context of a compensation award,” Professor Lund said.

And unlike the previous vote on the compensation package, Elon and Kimbal Musk will be able to vote as they try to reach the majority threshold needed to seal the deal.

Mr Musk is already the richest man in the world and became the first known half-trillionaire earlier this year.

Tesla’s argument in support of the pay package is based on the idea that Musk could leave the company if shareholders do not follow the board’s recommendation and approve the pay package.

He says he can’t afford to lose her and that she “alone has the leadership qualities necessary to accomplish his long-term mission.”

In the video posted on votestesla.com, Ms. Wilson-Thompson said the board began a seven-month process using legal and compensation experts to draft the compensation agreement.

On last month’s earnings call, Musk minimized the focus on pay, saying the key was to ensure he had enough control to steer Tesla in the right direction.

But aside from the question of whether Musk’s concerns about autonomous cars and humanoid robots set the right course, there’s also the issue of whether it’s the board’s job to defend the boss.

“The board’s role is to have a fiduciary responsibility to shareholders and not to defend a CEO,” said Matthew Kotchen, an economics professor at the Yale School of the Environment. Co-author of a recent study We’re trying to gauge the damage Mr. Musk has done to Tesla lately.

It is clear that a number of key decision-makers are not convinced that the deal represents value for money.

Proxy advisers Glass Lewis and Institutional Shareholder Services (ISS), which advise asset managers on how to vote on major institutional bids, advised investors to reject the pay package, saying it was excessive and would reduce shareholder value.

Norway’s sovereign wealth fund, the world’s largest sovereign wealth fund, and CalPERS, the largest public pension fund in the United States, have followed suit.

New York State Comptroller Thomas DiNapoli called on investors also deny directors re-election to the board, saying they failed “to provide independent oversight and accountability.”

Opposition from some institutions could leave Musk even more reliant on Tesla’s unusually large volume of retail investors—who tend to support him—to carry out his wishes.

This all means: Words of Morgan Stanley analyst Adam Jonas said Thursday’s vote will be one of the “most important events” in Tesla history and there is a “distinct possibility” that the pay package will not be accepted.

It doesn’t help Musk’s case that protesters continue to hold anti-Tesla rallies months after Musk’s controversial return when US President Donald Trump’s government efficiency czar crashed and burned in May.

“It is hard for me to imagine that Elon Musk will undo the damage he has done to this brand in the very near future,” Mr. Kotchen said.

Others say Musk’s extraordinary entrepreneurial track record makes it unwise to bet against him, even if the stakes are as dizzyingly high as $1 trillion.

“It’s hard to deny that Elon Musk’s larger-than-life personality has brought more attention and awareness to his organization than any other corporate leader in the modern era,” said Jessica Caldwell, head of insight at Edmunds.

“He has become a more polarizing figure over time, but there is still a belief in his ability to put forward bold, unconventional ideas,” he added.

Now the trillion-dollar question is: Do Tesla shareholders agree?