On Thursday, shareholders will be asked to vote on an ultimatum: approve compensation of up to $878 billion in stock for Musk or risk his departure, which could crash the company's stock.
The Tesla board is betting everything on Elon Musk. Now, investors must decide whether to support the biggest gamble in the company's history.
On Thursday, shareholders will be asked to vote on an ultimatum: approve compensation of up to $878 billion in stock for Musk or risk his departure, which could crash the company's stock.
Analysts suggest this is a referendum on whether classic corporate governance rules apply when talking about the world's richest person.
Tesla's vision rests on one person
The board and several investors insist that only Musk can realize the vision of transforming Tesla into an Artificial Intelligence giant, with millions of autonomous robotaxis and humanoid robots.
If he achieves all the targets over the next ten years, Tesla's market value will have surged to $8.5 trillion—with him owning about a quarter of the company. His compensation would far exceed any other in the world, even if he fell short of most performance targets.
As Nancy Tengler, CEO of Laffer Tengler Investments, stated:
"If the stock is going to increase sixfold—and that's what's required here—then I'm going to make a lot of money. Why would I care what he takes if he delivers the strategy and the vision?"
Critics see dangerous concentration of power
Large shareholders and corporate governance experts warn that this massive compensation poses a serious risk. The pay plan, they argue, violates fundamental governance principles, as it rests Tesla's entire future on a single leader, with conflicts of interest and increasing, uncontrolled power.
Charles Elson from the University of Delaware stressed:
"The board is being held hostage by a 'superstar CEO.' The right answer would be, 'Good day to you'."
Major shareholders, such as CalPERS and Norway's Norges Bank Investment Management, have openly stated their opposition to the package, warning of shareholder dilution and excessive reliance on one person.
The threat of departure
Musk has warned that he may prioritize his other ventures—SpaceX, xAI, Neuralink—if his terms are not met. Board Chair Robyn Denholm frequently reiterates that Tesla risks losing value without Musk at the helm.
David Larcker of Stanford commented:
"If you think Musk might leave and the stock will crash, that's not something you want to happen on your watch."
Gautam Mukunda of Yale was sharper:
"He's holding the gun to his own head saying, 'Give me $1 trillion.' It is not the board's job to simply nod at whatever the CEO asks for."
Musk holds approximately 15% of the votes, a percentage that could prove decisive. Unlike previous votes when the company was incorporated in Delaware, now—following Tesla's reincorporation to Texas—he is legally entitled to vote in favor of his own compensation.
This occurred after a Delaware judge characterized the previous 2018 pay package as an "unfathomable amount," resulting from negotiations with advisors closely tied to Musk.
Texas law now makes it difficult for shareholders to sue executives, requiring a collective stake of at least 3%—a prerequisite that now also applies to Tesla.
The crucial question
Charles Whitehead of Cornell points out that the board is in a classic "hostage" situation. And he posed the pivotal question:
"Who is going to replace this CEO if he leaves, or—God forbid—if something happens to him?"
www.bankingnews.gr
On Thursday, shareholders will be asked to vote on an ultimatum: approve compensation of up to $878 billion in stock for Musk or risk his departure, which could crash the company's stock.
Analysts suggest this is a referendum on whether classic corporate governance rules apply when talking about the world's richest person.
Tesla's vision rests on one person
The board and several investors insist that only Musk can realize the vision of transforming Tesla into an Artificial Intelligence giant, with millions of autonomous robotaxis and humanoid robots.
If he achieves all the targets over the next ten years, Tesla's market value will have surged to $8.5 trillion—with him owning about a quarter of the company. His compensation would far exceed any other in the world, even if he fell short of most performance targets.
As Nancy Tengler, CEO of Laffer Tengler Investments, stated:
"If the stock is going to increase sixfold—and that's what's required here—then I'm going to make a lot of money. Why would I care what he takes if he delivers the strategy and the vision?"
Critics see dangerous concentration of power
Large shareholders and corporate governance experts warn that this massive compensation poses a serious risk. The pay plan, they argue, violates fundamental governance principles, as it rests Tesla's entire future on a single leader, with conflicts of interest and increasing, uncontrolled power.
Charles Elson from the University of Delaware stressed:
"The board is being held hostage by a 'superstar CEO.' The right answer would be, 'Good day to you'."
Major shareholders, such as CalPERS and Norway's Norges Bank Investment Management, have openly stated their opposition to the package, warning of shareholder dilution and excessive reliance on one person.
The threat of departure
Musk has warned that he may prioritize his other ventures—SpaceX, xAI, Neuralink—if his terms are not met. Board Chair Robyn Denholm frequently reiterates that Tesla risks losing value without Musk at the helm.
David Larcker of Stanford commented:
"If you think Musk might leave and the stock will crash, that's not something you want to happen on your watch."
Gautam Mukunda of Yale was sharper:
"He's holding the gun to his own head saying, 'Give me $1 trillion.' It is not the board's job to simply nod at whatever the CEO asks for."
Musk holds approximately 15% of the votes, a percentage that could prove decisive. Unlike previous votes when the company was incorporated in Delaware, now—following Tesla's reincorporation to Texas—he is legally entitled to vote in favor of his own compensation.
This occurred after a Delaware judge characterized the previous 2018 pay package as an "unfathomable amount," resulting from negotiations with advisors closely tied to Musk.
Texas law now makes it difficult for shareholders to sue executives, requiring a collective stake of at least 3%—a prerequisite that now also applies to Tesla.
The crucial question
Charles Whitehead of Cornell points out that the board is in a classic "hostage" situation. And he posed the pivotal question:
"Who is going to replace this CEO if he leaves, or—God forbid—if something happens to him?"
www.bankingnews.gr
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