Tesla Shareholders Approve Elon Musk's Multi-Billion Dollar Compensation Plan

The majority of Tesla shareholders have expressed strong support for a historic compensation package for CEO Elon Musk, potentially valued at nearly one trillion US dollars. The decision was reached at Tesla's annual general meeting, where more than 75 percent of voting shareholders endorsed the plan, despite previous concerns from prominent investors and the board of directors.

The approved compensation package is contingent upon Tesla achieving ambitious business milestones over the next decade. If these targets are met, Musk's stake in Tesla could increase from the current 13 percent to as much as 25 percent. The benchmarks include Tesla reaching a market capitalization approximately six times its present value, deploying one million autonomous robotaxis, and delivering one million artificial intelligence-powered robots known as Optimus. These robots are still in development and have not yet entered the commercial market.

Although Tesla recently announced record sales, the company is on track for its second consecutive year of declining sales volumes. The recent surge in demand was attributed in part to the impending expiration of the electric vehicle subsidy in the United States. Despite these challenges, Musk has emphasized that Tesla's future lies in autonomous driving technologies and humanoid robotics, suggesting that the value of these innovations could ultimately account for the majority of the company's worth.

Investor Warnings and Board Considerations

Leading investors and institutional stakeholders had previously voiced objections to the size and structure of Musk's compensation plan, citing concerns over corporate governance and company performance. Several argued that the board's determination to retain Musk at any cost could affect Tesla's reputation and oversight standards. In response, the board cautioned that Musk might consider stepping down as CEO if a new equity package was not approved, potentially impacting Tesla's strategic direction.

Under the terms of the package, Musk will only receive the substantial equity awards if Tesla meets a series of financial and operational milestones. These include incremental increases in Tesla's market capitalization, with each tranche of stock options becoming available as the company hits $500 billion benchmarks. Additional goals include achieving 20 million Tesla vehicle deliveries at a market value of two trillion dollars, as well as reaching $400 billion in adjusted earnings before interest, taxes, depreciation, and amortization--an especially challenging target.

Additional Targets and Market Reaction

The compensation plan also requires Tesla to obtain 10 million active subscriptions to its Full Self-Driving (FSD) software, though it remains unclear whether free trial subscriptions would count toward this goal. Currently, Tesla offers a supervised version of FSD in the US, which still requires driver intervention.

Alongside the compensation vote, shareholders also considered whether Tesla should invest in xAI, Musk's artificial intelligence company. Although a majority appeared to favor the proposal, a high number of abstentions delayed a definitive decision, leading Tesla to explore further actions regarding potential investments.

Following the outcomes of the shareholder meeting, Tesla's stock price experienced volatility during the trading session. Despite an initial decline of 3.5 percent, the share price rebounded in after-hours trading, closing approximately 1.5 percent higher. The market's reaction reflected cautious optimism about Tesla's long-term prospects under Musk's continued leadership and the ambitious growth targets embedded in the compensation package.

Tesla's leadership has emphasized that the new compensation structure provides sufficient incentives to retain Musk's focus, time, and vision for the company. Musk himself has suggested that increasing his ownership stake is more important than the monetary value, aiming to maintain significant influence over Tesla's future direction.