Investor Coalition Challenges Tesla's $1 Trillion Musk Pay, Demands Board Reforms

A growing coalition of pension funds and institutional investors is mounting a challenge against Tesla Inc.'s proposed $1 trillion pay package for CEO Elon Musk, arguing that the unprecedented compensation structure and corporate governance practices threaten long-term shareholder value. The investor group, representing entities including the New York City Comptroller, American Federation of Teachers, and state treasurers from seven U.S. states, has urged Tesla shareholders to vote against the proposal and replace three board members up for re-election. The group contends that Tesla's board lacks independence and has failed to provide rigorous oversight of Musk, who has spent significant time on ventures such as xAI, SpaceX, and government initiatives like the Department of Government Efficiency (DOGE) Electrek^[1].

Tesla's proposed pay package, outlined in a September SEC filing, would grant Musk up to 12% of the company's outstanding shares over a decade if he meets ambitious performance targets. These include raising Tesla's market capitalization from $1.37 trillion to $8.5 trillion and achieving operational milestones such as delivering 20 million vehicles, 1 million robots, and 1 million robotaxis. Critics argue the targets are "vague" and "undemanding," with Tesla's board retaining significant discretion in their interpretation. The package also includes a $975 billion valuation based on maximum share payouts, which would further dilute existing shareholders Forbes^[2].

The investor group's letter highlights Tesla's declining performance, including falling sales in key markets and high stock volatility, as evidence of poor corporate governance. It points to the board's close ties to Musk, with two current or former Tesla executives, four board members with personal connections to the CEO, and four directors serving for over a decade. The group also notes that Tesla's board chair, Robyn Denholm, has earned nearly 200 times the average S&P 500 director's compensation, raising concerns about impartiality Fortune^[3]. The letter calls for replacing the three directors up for re-election-Ira Ehrenpreis, Joe Gebbia, and Kathleen Wilson-Thompson-due to perceived conflicts of interest and a lack of accountability.

Tesla has defended the pay package as a mechanism to align Musk's incentives with shareholder interests, stating that the compensation is contingent on achieving "super ambitious milestones." The company argues that Musk's leadership has driven innovation in electric vehicles and robotics, and that the board's primary goal is to ensure his continued focus on Tesla. However, the investor group counters that Musk's distractions-such as his recent role at DOGE and his ownership of xAI-detract from his responsibilities to Tesla. They also criticize the board's failure to enforce minimum time commitments for Musk to prioritize Tesla's operations New York State Comptroller Office^[4].

The shareholder vote, scheduled for November 6, has become a pivotal moment for corporate governance debates. Institutional investors and retail shareholders collectively hold significant voting power, with Tesla's board chairing a campaign to rally support for the proposal. The company has leveraged social media and a dedicated investor website to educate shareholders on how to vote, a strategy that proved effective in prior years. However, the investor group warns that approving the pay package could set a dangerous precedent for executive compensation and corporate accountability CNBC^[5].

Sources:

Electrek^[1] Electrek

Forbes^[2] Forbes

Fortune^[3] Fortune

New York State Comptroller Office^[4] New York State Comptroller Office

CNBC^[5] CNBC