Tesla says Musk should be paid $1tn

Ahead of Tesla's annual general meeting (AGM) on Thursday, the electric vehicle maker delivered one key message to shareholders: The boss is worth $1 trillion.

The company has pulled digital ads to make the case for Elon Musk's pay rise, and Votetesla.com is showing video of chairman Robin Denholm and director Kathleen Wilson-Thompson praising him, set to a triumphant musical crescendo.

But it's unclear whether everyone is singing from the same anthem, meaning the annual general meeting of shareholders in Austin, Texas, is set to be a referendum on Musk himself after a political turn to the right that has made him one of the most polarizing CEOs in recent memory.

Musk himself has turned to Company X, which he owns, to up the ante even further, saying Tesla's fate “could shape the future of civilization.”

He also used his social media megaphone to grab the attention of some of the deal's high-profile backers, including Dell Technologies' Michael Dell, Ark Invest CEO Cathie Wood and his brother Kimbal, who sits on Tesla's board of directors.

“There’s no one who’s even remotely close to my brother,” Kimball said, extolling his brother’s leadership qualities.

“Thanks bro ❤️,” Musk replied.

Not everyone agrees.

For some, the focus on Musk and the soap opera surrounding his salary is a symptom of how the automaker… where sales fell – got lost under his leadership.

“What surprises me is that a company struggling to sell cars would spend money on advertising to sell a pay package,” said Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management.

In recent years, Gerber has reduced his holdings in Tesla and has been sharply critical of the direction the company is heading.

“[Tesla] the company needs to change its focus back to its core goal of selling electric vehicles again,” he said.

The deal Tesla wants shareholders to support isn't a one-twelve-zero payday.

Instead, Musk's goal is to raise Tesla's market value to $8.5 trillion from $1.4 trillion at the time of writing.

He will also have to oversee the massive boom in the company's self-driving “Robotaxi” cars, putting a million of them into commercial service – no small task given their disappointing launch.

Doing this, in addition to meeting other benchmarks, would give Musk 423.7 million new shares, worth nearly $1 trillion if the target valuation is met.

Tesla did not respond to BBC requests for comment on its strategy to win shareholder support.

Of course, this is not the first salary dispute that Musk and Tesla have been involved in.

Previously, Tesla got shareholders to twice ratify Musk's compensation package, which was worth tens of billions of dollars, if he achieves a tenfold increase in Tesla's market value.

He reached this milestone, but in 2024, a Delaware judge rejected the deal on the grounds that members of Tesla's board of directors were too personally and financially connected to the head of the company.

The Delaware Supreme Court is reviewing the decision even as discussions continue over an even larger pay package.

“The strategy is very similar to Tesla's, but that doesn't mean it's OK. There is nothing normal about Tesla,” Dorothy Lund, a professor at Columbia Law School, told BBC News.

“They are not models of good corporate governance.”

Prof Lund said such anti-vote campaigns were sometimes carried out, for example when a company was concerned. about an activist shareholder pushing for significant changes in its performance, such as who sits on its board of directors.

“[But] Never in my life have I seen something like this happen in the context of a compensation decision,” said Professor Lund.

And unlike the vote on the previous compensation package, Elon and Kimbal Musk will be able to vote as they seek to reach the majority threshold needed to seal the deal.

Musk is already the richest person in the world. formation the first known half-trillionaire earlier this year.

Tesla's reasoning for supporting the pay package is based on the idea that Musk could leave the company if shareholders do not follow the board's recommendation and approve the pay package.

It says it cannot afford to lose him and that he “extraordinarily possesses the leadership qualities necessary to… realize his long-term mission.”

In a video posted on votetesla.com, Ms Wilson-Thompson said the council undertook a seven-month process involving legal and compensation experts to develop the compensation agreement.

During an earnings call last month, Musk played down the focus on payouts, saying the real challenge was ensuring he had adequate controls to run Tesla properly.

But beyond the question of whether Musk, with his preoccupation with autonomous cars and humanoid robots, is charting the right course, there is also the question of whether protecting the boss is the board's job.

“The role of the board of directors is to have a fiduciary responsibility to shareholders, not to protect the interests of the CEO,” said Matthew Kotchen of the Yale School of the Environment, a professor of economics who co-authored a recent study trying to quantify the damage Musk has done to Tesla lately.

It is clear that a number of key decision makers are not convinced that the deal represents value for money.

Trustee advisers Glass Lewis and Institutional Shareholder Services (ISS), which advise asset managers on how to vote on major corporate proposals, recommended investors reject the pay package, saying it was excessive and would reduce shareholder value.

This example was followed by Norway's sovereign wealth fund, the world's largest sovereign wealth fund, as well as the largest US government pension fund, CalPERS.

New York State Comptroller Thomas DiNapoli called on investors also reject the directors' nominations for re-election to the board, saying they failed to “provide independent oversight and accountability.”

With some institutions pushing back, it could leave Mr. Musk more reliant on Tesla's unusually large number of retail investors, who typically back him, to get his way.

All this means that in Morgan Stanley analyst's words Adam Jonas Thursday's vote will be one of the “most important events” in Tesla history – with a “clear possibility” that the payout package will not pass.

It doesn't help Musk's affairs that protesters continue to organize rallies against Tesla, months after his controversial run as US President Donald Trump's government efficiency czar. crashed and burned in May.

“I find it hard to imagine Elon Musk undoing the damage he has done to this brand any time soon,” Mr. Kotchen said.

Others, however, will say that Musk's exceptional track record of entrepreneurship makes it unwise to bet against him, even if the bet is a dizzying $1 trillion.

“It's hard to deny that Elon Musk's larger-than-life personality has helped bring more interest and awareness to his organization than almost any other corporate leader in the modern era,” said Edmunds chief research officer Jessica Caldwell.

“Over time, he has become a more controversial figure, but there is still faith in his ability to implement bold, unconventional ideas,” she added.

The trillion-dollar question now is: Do Tesla shareholders agree?