In a bold move, Tesla’s board and chair have put the chip in: Elon Musk could step down as CEO if shareholders reject a proposed $1 trillion pay package. This development has sent ripples through the governance and investor community
Here’s a full breakdown of the story: what the package entails, the stakes, the reactions, and what it means going forward.
What’s on offer in the pay package
- Tesla’s board approved a compensation scheme for Musk valued at up to $1 trillion — making it the largest ever proposed for a corporate CEO.
- The plan is structured in 12 tranches of stock options, each tied to specific performance milestones: e.g., achieving a market-capitalisation target of around US$8.5 trillion, leading in robotics/AI (the “robot army”), and scaling autonomous driving.
- If approved, Musk’s ownership stake and voting power at Tesla would increase significantly (reportedly from ~13% towards ~25% or more).
Why the board is pushing it
The board, led by Chair Robyn Denholm, argues that Musk’s leadership is critical to Tesla’s next phase — pivoting from just electric vehicles to AI, robotics and autonomous systems. They warn that rejecting the package could risk losing his “time, talent and vision”.
Denholm emphasised in a shareholder letter that the vote (scheduled around 6 Nov) is not just about compensation, but about ensuring Musk’s influence remains strong in guiding Tesla’s future.
The threat of Musk leaving
- If the package is rejected, the board has warned Musk might leave the company, causing uncertainty about Tesla’s direction.
- Musk himself has made comments suggesting he needs enough voting power and control to ensure his vision (robotics, AI) can proceed — implying that without it, he may focus elsewhere. Business Insider
- This creates a governance issue: a company publicly warning that failing to reward its CEO could result in his departure — a rare, high-stakes ultimatum.
Reaction & concerns
- Proxy advisory firms (such as Institutional Shareholder Services / ISS and Glass Lewis) are opposed to the package. They raise concerns about its size, dilution for shareholders, and board independence.
- Investors and governance watchers fear that backing the largest CEO pay package ever could set a troubling precedent and raise questions around oversight, fairness and alignment of interests.
- On the other hand, shareholders who believe in Musk’s long-term vision for Tesla may see the risk of him leaving as too large to ignore — meaning they might support the package to preserve continuity.
Implications for Tesla
- Strategic continuity: If Musk leaves, Tesla may face turbulence in leadership, strategy execution and investor confidence — especially with heavy bets on AI/robotics.
- Governance spotlight: The process shines a light on Tesla’s board dynamics, Musk’s dominance in the company, and how shareholder power is balanced (or not).
- Shareholder value: Whether the package creates long-term value is uncertain. If Tesla meets the ambitious targets, perhaps yes; if not, the dilution and misalignment risk may bite.
- Investor vote outcome: The upcoming shareholder vote (Nov 6) will be a key marker. A rejection might force Musk to reconsider his role; approval will still leave questions about execution.
What to watch going forward
- The shareholder vote outcome and its margin — how many institutional and retail investors back or oppose the package.
- Which board directors up for re-election, and whether their re-election is tied to support for the package.
- How Tesla addresses the proxy firms’ criticisms — will the board provide stronger independence assurances or revise the package?
- Execution of milestones: How realistic are the targets (market Cap of US$8.5 trillion, building “robot army”, full autonomy) and how visible the tracking will be to investors.
- Leadership succession possibilities: If Musk leaves/acquiesces, who steps up and whether the company’s trajectory changes.
Conclusion
Elon Musk’s proposed $1 trillion pay package at Tesla isn’t just about compensation — it’s about control, strategy, future vision and shareholder alignment. The board’s warning that Musk may leave if the package is rejected signals the high stakes involved.
For shareholders, it’s a balancing act: approve a monumental CEO pay-deal and hope the vision materialises, or reject it and risk the departure of a founder CEO whose leadership has defined the company.
