TLDR
- Tesla shareholders voted more than three to one to approve Elon Musk’s 2025 compensation package of 400 million shares worth up to $1 trillion over ten years.
- The pay deal requires Tesla to hit $400 million in EBITDA over a 12-month period, with 2025 EBITDA expected at $13 billion.
- The package restores Musk’s ownership to 25% and follows a Delaware judge voiding his 2018 pay package worth $120 billion.
- Musk’s total compensation from previous deals already totals over $150 billion from 380 million shares awarded since 2012.
- The approval signals Tesla’s transformation from automaker to AI and robotics company under Musk’s continued leadership.
Tesla held its annual shareholder meeting on November 6 with Elon Musk’s compensation taking center stage. The vote wasn’t close.
Shareholders approved the CEO’s 2025 pay package by more than three to one. The deal grants Musk approximately 400 million incentive-laden Tesla shares if he meets performance targets over the next decade.
The shares are currently valued at $170 billion. If Musk hits all milestones, the package could reach $1 trillion in total value.
Breaking Down the Compensation Structure
The pay package ties compensation directly to company performance. Tesla must generate $400 million in EBITDA over a 12-month period for Musk to unlock the shares.
For perspective, analysts expect Tesla to generate roughly $13 billion in EBITDA for 2025, according to FactSet. The current target represents a fraction of expected earnings.
If Musk achieves all milestones over ten years, he’ll earn approximately $275 million per day. That jumps to $385 million daily if weekends are excluded.
The average S&P 500 CEO earns about $20 million annually, Bloomberg reports. Musk’s daily earnings would exceed what most CEOs make in a full year by 13 to 19 times.
The 400 million share award aims to restore Musk’s Tesla ownership to 25%. That’s the specific percentage Musk requested from the board.
This compensation adds to previous awards. In 2018, Tesla granted Musk around 300 million stock options. A Delaware judge later voided that package, citing insufficient shareholder disclosures.
Shareholders voted to re-award the 2018 package, now worth approximately $120 billion. Combined with an 80 million share award from 2012 worth $34 billion today, Musk has earned over $150 billion in total compensation.
That works out to roughly $12 billion per year in compensation. One shareholder joked at the meeting: “Congrats on not having to show up to work for free anymore.”
Why Shareholders Backed the Deal
The vote represents confidence in Musk’s vision for Tesla’s future. The company is shifting from pure automotive manufacturer to AI and robotics leader.
Musk told shareholders he wants voting power to maintain control during this transition. He said he’s uncomfortable building a “robot army” if critics could remove him from leadership.
The Tesla board positioned the package as necessary to retain unique talent. They view the compensation as insurance against the risk of losing Musk.
Tesla stock performance remains closely tied to Musk’s leadership and public persona. Investors backing the package believe his vision can translate into real-world products.
Jo-Ellen Pozner, associate professor at Santa Clara University’s Leavey School of Business, points to psychological anchoring. When Musk requested 25% ownership, he set the negotiation starting point.
“Anchoring is the principle that explains why it’s a good idea to make the first offer in a negotiation,” Pozner explained.
The Path Forward
The compensation structure scales with company market value. As Tesla stock price increases, so does Musk’s potential payout.
Tesla faces risks from heavy dependence on one executive. Recent sales declines have been partially attributed to Musk’s political activities and public statements.
Critics argue the structure potentially dilutes other shareholders’ influence while satisfying Musk’s demands. The company is taking on more concentration risk.
The approval positions Musk to potentially become the first trillion-dollar CEO in history. Shareholders are betting he can transform another industry after reshaping automotive manufacturing.
The vote gives Musk the authority to pursue Tesla’s evolution into AI and robotics development. Investors believe he’ll lead the tech industry’s push to mass-produce physical AI applications.