Elon Musk is already the world’s richest man, but today he could take a giant step towards becoming the world’s first trillionaire.
Shareholders at Tesla are voting on a pay deal for their chief executive that is unlike anything corporate America has ever seen.
The package would grant Musk, who already has a net worth of more than $400bn (£306bn), around 425 million shares in the company.
That would net him about $1trn (£760bn) and, perhaps more importantly to Musk, it would tighten his grip on the company by raising his stake from 15% to almost 30%.
The board, which has been making its case to retail investors with a series of videos and digital ads, has a simple message: Tesla is at a turning point.
Yes, it wants to sell millions of cars, but it also wants to be a pioneer in robotaxis, AI-driven humanoid robots, and autonomous driving software. At this moment, it needs its visionary leader motivated and fully on board.
Musk has served his warning shot. Late last month, he wrote on X: “Tesla is worth more than all other automotive companies combined. Which of those CEOs would you like to run Tesla? It won’t be me.”
Not everyone is buying it, however.
With so much of his personal wealth tied up in Tesla, would Musk really walk away?
Bad for the brand?
Others see his continued presence and rising influence as a risk. Norway’s sovereign wealth fund, the world’s largest, which owns 1.1% of the company (making it a top 10 shareholder), has already declared it will vote against the deal. It cited concerns about “the award’s size, dilution, and lack of mitigation of key person risk”.
Several major US pension funds have followed suit. In an open letter published last month, they warned: “The board’s relentless pursuit of keeping its chief executive has damaged Tesla’s reputation.”
They also criticised the board for allowing Musk to pursue other ventures. They said he was overcommitted and distracted as a result. Signatories of that letter included the state treasurers of Nevada, New Mexico, Connecticut, Massachusetts, Colorado, and the comptrollers of Maryland and New York City.
All of them Democrats. Republicans have been more favourable. There is a political slant to this.
The signatories’ concerns with his “other ventures” no doubt include the time Musk spent dabbling in right-wing politics with the Republican inner circle. That made him a polarising figure and, to an extent, Tesla too.
Pay packet dwarfs rivals
Combine this with a mixed sales performance and a volatile share price, and some are wondering whether the carmaker has lost its way under his leadership.
Irrespective of performance, for some, the existence of billionaires – let alone trillionaires – can never be justified. Some may also ask why Musk is worth so much more than the leaders of Apple, Facebook, and Microsoft, or Nvidia, the world’s most valuable company by market capitalisation.
Nvidia‘s chief executive, Jensen Huang, received $49.9m (£37.9m) this fiscal year. So, how has Tesla come up with these numbers? Why is Musk’s pay so out of kilter with the benchmark? Does the company have a corporate governance problem?
The courts have suggested it might. Last year, a Delaware court took the view that Tesla’s board members, which include Musk’s brother Kimbal, were not fully independent when agreeing to a $56bn (£42.6bn) pay packet back in 2017.
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The Delaware Supreme Court is now reviewing the case. It is a reminder that even if Musk meets his targets, a similar fate could befall the current package.
The Tesla board is holding firm, however. Robyn Denholm, the company’s chair, told The New York Times: “He doesn’t get any compensation if he doesn’t deliver,” adding that Musk “does things that further humankind”.
Tesla’s valuation is tied up in its promise to deliver revolutionary AI and robotics products that will change the world. Those ambitions, which include robots that can look after children, are lofty. Some would call them unrealistic, but the board is adamant that if they are to become a reality, only Musk can make it happen.
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Under the deal, Musk would receive no salary or cash bonus. Instead, he would collect shares as Tesla’s value grows. To unlock the full package, he would have to increase the current market valuation six times to $8.5trn (£6.47trn). For context, that’s almost twice that of Nvidia.
There are other hurdles. The company would have to sell 20 million additional electric vehicles, achieve 10 million subscriptions to its self-driving software on average over three months, deploy one million robotaxis on average over the same period, sell one million AI-powered robots, and boost adjusted earnings 24-fold to $400bn (£304bn).
They are ambitious targets, but Musk has defied the sceptics before.
