Why Tesla Shareholders Just Gave Elon Musk The Richest CEO Pay-Day In The Universe?

Elon Musk, the CEO of Tesla, has secured a historic $1 trillion pay package. This decision was overwhelmingly approved by shareholders during Tesla's annual meeting in Austin, Texas, on 6 November. The announcement at Tesla's Austin factory marks the largest payout ever granted to a corporate leader, as reported by AFP.

The compensation plan is designed to ensure Musk remains committed to Tesla as it advances in artificial intelligence and robotics. Over 75% of shareholders supported this proposal, according to a Tesla official present at the meeting. The plan aims to keep Musk with Tesla for at least seven and a half years.

Shareholder Support and Future Goals

Musk expressed gratitude after the announcement, stating, "I'd like to just give a heartfelt thanks to everyone who supported the shareholder votes. I super-appreciate it." He has often highlighted Tesla's growth potential as virtually limitless. In July, he mentioned that if Tesla achieves its goals in autonomous driving and AI, it "will be the most valuable company in the world by far."

However, Musk had also hinted that he might step back from Tesla or reduce his involvement unless his ownership stake increases enough to secure his desired level of control over the company's direction. The compensation plan could increase his ownership from roughly 12% to possibly more than 25%.

Board's Perspective and Criticism

Tesla Chair Robin Denholm urged shareholders to support the proposal, stressing that retaining Musk is vital for the company's future. She warned that if Musk were to leave, the stock could drop significantly. The board has dismissed criticism regarding Musk's association with divisive political figures affecting sales.

Tesla shareholders have historically backed Musk in votes concerning his compensation. This includes a 2018 package worth approximately $55.8 billion that faced legal challenges due to shareholder lawsuits in Delaware.

Activist Group Opposition

The activist group Tesla Takedown condemned the outcome of the recent vote. They pointed out Tesla's recent decline in vehicle sales and stated, "Elon Musk just got one trillion dollars for failure. Sales are down, safety risks are up, and his politics are driving customers away. This isn't leadership -- it's the world's most expensive participation trophy."

Despite these criticisms, Elon Musk remains the world's richest individual with a net worth exceeding $500 billion according to Forbes' real-time billionaire rankings.

Compensation Plan Details

The compensation package requires Musk to achieve 12 milestones tied to Tesla's market capitalisation. The first portion becomes available once Tesla's valuation reaches $2 trillion from its current $1.5 trillion. Additionally, there are performance targets related to operating profit and product output, including delivering 20 million Tesla vehicles.

Following a Delaware court ruling halting a previous package due to shareholder lawsuits, Denholm and Tesla's board revisited the issue. They first approved an interim compensation package valued at about $29 billion in August before introducing a larger plan in September.