Tesla Shareholder Approval of Musk's $1 Trillion Pay Package: Comprehensive Analysis

This analysis is based on the Reddit discussion [1] and comprehensive market coverage of Tesla’s shareholder vote on November 6, 2025, at 5:39 PM EST, which approved CEO Elon Musk’s historic $1 trillion performance-based pay package with over 75% support [2][3].

The shareholder approval during Tesla’s annual meeting in Austin, Texas represents a significant governance decision despite substantial opposition from major institutional advisors. The market reaction was notably negative, with TSLA declining 3.47% to $445.91 on November 6 on high volume of 109.6M shares, followed by an additional 1.92% drop to $429.52 on November 7 [0]. This 5.3% two-day decline suggests investor concerns about dilution and the ambitious nature of the compensation targets, despite the shareholder approval.

The unprecedented package consists of 12 tranches with escalating targets through 2035 [2]:

• First tranche: $2 trillion (44% increase from current $1.38T)
• Final tranche: $8.5 trillion (466% increase from current levels)
• Intermediate targets: $500B increments up to $6.5T, then $1T increments

• Annual adjusted EBITDA from $50B to $400B (vs. Q3 2025: $4.2B)
• 20 million vehicle deliveries (vs. 8M cumulative to date)
• 10 million FSD subscriptions
• 1 million Optimus robots delivered
• 1 million robotaxis in commercial operation

The plan would increase Musk’s ownership from approximately 13% to 25% of Tesla shares, significantly boosting his voting power [2].

Notably, the compensation plan includes broad “covered events” provisions that could enable payouts even if targets are missed due to [2]:

• Natural disasters, wars, pandemics
• Changes in laws, regulations, or government action

This clause creates potential for Musk to earn tens of billions without meeting most operational targets, raising significant governance concerns.

Major proxy advisors ISS and Glass Lewis both recommended voting against the package, citing [4][5]:

• “Extraordinarily high pay opportunities” over 10 years
• Reduced board ability to adjust future pay levels
• Potential upfront and future dilutive impacts
• Extraordinary pay without commensurately exceptional performance

Norway’s sovereign wealth fund (NBIM), a major institutional investor, also voted against the package, citing concerns about the total award size, dilution effects, and lack of mitigation of key person risk [5].

This vote follows Delaware Court of Chancery’s 2024 ruling that struck down Musk’s 2018 $56 billion pay package [6][7]. The court found the board lacked independence from Musk and that shareholders lacked key information during voting. Tesla has appealed to Delaware Supreme Court, with arguments heard in October 2025. This new package represents an attempt to address legal concerns while maintaining a similar structure.

The vote occurs during a challenging period for Tesla [3]:

• Sales and profits plunged in first half of 2025
• Reduced US government support for EVs impacting revenue
• Heavy competition in EV market
• Dependence on unproven future technologies (robotaxis, Optimus robots)

Tesla currently trades at premium valuation levels [0]:

• P/E Ratio: 226.06x (extremely high relative to traditional automakers)
• Market Cap: $1.38T (would need to reach $8.5T for full payout)
• 52-week range: $214.25 - $488.54

The $8.5T market cap requirement exceeds the current most valuable company (Nvidia at $5T) by 70% [3].

1. Achievability of Targets
   : The $8.5T market cap requirement represents a 466% increase from current levels and exceeds the world’s most valuable company by 70% [3]

2. Dilution Risk
   : The 423M shares represent approximately 12% of adjusted shares, significantly diluting existing shareholders [5]

3. Key Person Dependency
   : The package increases Tesla’s dependence on Musk, who already runs multiple companies (SpaceX, xAI, Neuralink, Boring Company) and is politically active [2]

4. Legal Uncertainty
   : Delaware Supreme Court ruling on 2018 package appeal could impact this new arrangement [6][7]

5. Execution Risk
   : Key targets depend on technologies not yet commercialized (Optimus robots, robotaxis, FSD) [2]

• Alignment Incentives
  : The package could theoretically align Musk’s interests with long-term shareholder value creation if targets are achieved
• Innovation Catalyst
  : The ambitious operational targets could accelerate development of autonomous driving and robotics technologies
• Market Leadership
  : Success could position Tesla as the world’s most valuable company and transform multiple industries

Decision-makers should track:

• Progress toward operational milestones (vehicle deliveries, FSD subscriptions)
• Delaware Supreme Court ruling on 2018 package appeal
• Musk’s time allocation across his various companies
• Competitive dynamics in EV and autonomous driving markets
• Regulatory developments affecting Tesla’s technologies

The shareholder approval of Musk’s $1 trillion pay package represents a significant corporate governance event with substantial implications for Tesla’s future. While the vote passed with over 75% support, the negative market reaction and opposition from major proxy advisors suggest serious concerns about the package’s structure and achievability.

The plan’s success depends on achieving unprecedented growth in market capitalization to $8.5 trillion and operational milestones that require commercialization of emerging technologies. The broad “covered events” clause provides significant flexibility for payouts even if targets are not met, raising governance questions.

The 423 million share award represents substantial dilution for existing shareholders, while increasing Musk’s voting power to approximately 25%. Legal uncertainty remains due to the pending Delaware Supreme Court ruling on the previous $56 billion package.

Tesla faces significant business challenges including declining sales, increased competition, and reduced government support for EVs, making the achievement of these ambitious targets particularly challenging. The company’s current premium valuation at 226x earnings already reflects high growth expectations.

This compensation structure creates both significant risks and potential rewards, with outcomes heavily dependent on technological breakthroughs, market conditions, and regulatory environments over the next decade.