Tesla warns it could lose Elon Musk if shareholders don’t approve $1 trillion pay package

Tesla Chairwoman Robyn Denholm has once again called on shareholders to support a $1 trillion compensation package for CEO Elon Musk, the man considered the soul of the electric car company. She warned that if the plan is not approved, Tesla could face the risk of losing the leader who brought the company to its current position.

In a letter to shareholders Monday morning, Robyn Denholm stressed that the package was necessary to retain Musk and continue to drive Tesla’s ambitions. Under the proposal, unveiled in September, Musk would receive 12 huge stock option tranches if he meets high financial and growth targets.

“If we don’t create an environment that empowers Elon to achieve great things through fair pay-for-performance, Tesla risks losing his time, talent, and vision — the very things that have delivered extraordinary shareholder value,” Ms. Denholm wrote.

The new bonus package is designed similar to the “pay-for-performance” model that Tesla used, with extremely challenging targets for revenue, profit and market capitalization.

Billionaire Elon Musk

What is blocking the passage of this pay package?

Two independent consulting firms, Glass Lewis and ISS, have recommended that shareholders not approve the plan, saying the pay package is too large, could dilute shares and was issued by an unbiased board.

Musk’s 2018 pay package was previously sued by shareholders in Delaware, who said they were not given adequate information. A judge agreed, and the Delaware Supreme Court is now considering Tesla’s appeal.

However, analysts believe that the new salary package will likely still be approved at the shareholder meeting on November 5 because most shareholders consider Musk’s role “irreplaceable”.

What challenges is Elon Musk facing?

In addition to being criticized for his massive pay package, Musk has also been embroiled in a number of political controversies, from his participation in the White House DOGE Committee to his support of far-right politicians in Europe. These actions, critics say, have damaged Tesla’s brand image.

Musk and Ms. Denholm, however, insist that these compensation plans are not just about paying him, but also about keeping him engaged for the long term. Under the terms of the package, Musk cannot sell the shares for at least 7.5 years after they are granted and will only receive the bonus if he hits huge goals, such as bringing Tesla’s EBITDA to $ 400 billion (up from $16.6 billion now) and increasing its market capitalization to $8.5 trillion (up from $1.44 trillion now).

Why does Tesla believe that only Elon Musk can lead the company further?

“I firmly believe – as do the other board members – that Elon is uniquely qualified to lead Tesla to maximize long-term shareholder value and contribute to society,” Ms. Denholm said.

Musk has been central to Tesla’s core businesses, including electric vehicles, robotics, renewable energy and autonomous driving, she said, warning that Tesla could “lose significant value” without him at this pivotal time.

Tesla shares rose more than 4% on Monday, helped in part by positive market sentiment and expectations for its upcoming shareholder meeting.