Introduction
Tesla shareholders have approved an unprecedented compensation package for CEO Elon Musk, potentially worth up to $1 trillion. With over 75% voting in favor, this decision represents one of the most controversial and ambitious executive pay packages in corporate history, designed to incentivize Tesla's transformation into a global leader in artificial intelligence and humanoid robotics.
The Record-Breaking Pay Package: Structure and Goals
Elon Musk's compensation is structured into 12 tranches of stock, each tied to achieving extremely ambitious financial and operational milestones. To unlock the first tranche, Tesla must increase its market capitalization from approximately $1.5 trillion to $2 trillion, while combining this with operational targets such as selling 11.5 million new vehicles, in addition to the 8.5 million already on the road.
More challenging milestones include selling one million humanoid robots to paying customers and maintaining an adjusted EBITDA of $400 billion, compared to the $16 billion recorded in 2024. If Musk achieves all targets over the next 10 years, bringing Tesla's market cap to $8.5 trillion, he could control up to 25% of the company.
For each tranche unlocked, Musk will receive equity equivalent to approximately 1% of Tesla's current shares. While he can immediately vote with these shares, he cannot sell them until they vest, scheduled for either 7.5 or 10 years.
The Vote: A Referendum on Musk's Leadership
The compensation package vote was widely interpreted as a referendum on Elon Musk's leadership and strategic vision for Tesla. During the event at Tesla's Austin, Texas headquarters, Musk thanked shareholders while flanked by dancing humanoid robots, stating: "What we're about to embark upon is not merely a new chapter of the future of Tesla but a whole new book."
The CEO, already the largest shareholder with approximately 15% ownership, had threatened on social media to leave Tesla if the proposal was rejected. Musk explained he wanted an ownership stake large enough to ensure the "robot army" under development didn't fall into the wrong hands, but not so large that he couldn't be fired if he went "crazy."
Division Among Institutional Investors
The proposal divided institutional investors. Major shareholders including the California Public Employees' Retirement System, various New York City retirement systems, and Norges Bank Investment Management (with a 1.2% stake) opposed the package. Several proxy advisory firms, including Institutional Shareholder Services, expressed concerns about the "astronomical" magnitude of the compensation.
On the other hand, Charles Schwab, with a 0.6% stake, voted in favor, stating: "We firmly believe that supporting this proposal aligns both management and shareholder interests." Board Chair Robyn Denholm defended the proposal as performance-based pay, stating: "Having worked with him now for 11 years, I can say what motivates him is doing things that others can't do or haven't been able to do."
xAI Investment and Concentration Concerns
A separate proposal that would authorize Tesla's board to invest in Musk's artificial intelligence startup, xAI, received more votes in favor than against, but with many abstentions. General Counsel Brandon Ehrhart stated the board would consider its next steps. Musk had publicly endorsed the idea as he seeks to catch up in the AI race.
Tesla struggled during the first half of 2025, with vehicle sales falling more than 13%. This decline coincided with the period when Musk spent time in Washington running the Department of Government Efficiency. After leaving the government position in May, Musk turned his focus to xAI and the development of its chatbot Grok, according to The Wall Street Journal.
The 2018 Pay Package Legal Controversy
Musk's previous 2018 pay package, considered the most valuable on record before the 2025 package, is currently tied up in a dispute at the Delaware Supreme Court. Tesla is appealing a lower-court decision to rescind the 2018 compensation after a judge ruled in January 2024 that Tesla's directors were beholden to Musk and the approval process was tainted and lacked transparency.
"Moonshot" Packages: Pros and Cons
Stock compensation packages tied to ambitious targets, often called "moonshot" pay packages, are presented by proponents as high-octane incentives for outstanding performance. Critics argue they are often doubly flawed: overly expensive if targets prove easier than predicted, and counterproductive if the targets become unattainable, reducing executives' motivation to remain with the company.
In Musk's case, the package represents a bet on Tesla's ability to expand beyond electric vehicles, embracing autonomous robotaxis, humanoid robots, and advanced artificial intelligence solutions.
Conclusion
The approval of Elon Musk's $1 trillion pay package marks a pivotal moment for Tesla. As the company prepares to transform from an electric vehicle manufacturer into a leader in artificial intelligence and robotics, the shareholders' decision reflects confidence in Musk's vision, despite concerns about costs and concentration of decision-making power. The success of this gamble will depend on Tesla's ability to achieve unprecedented financial and technological targets over the next decade.
FAQ
How much is Elon Musk's Tesla pay package worth?
The package is potentially worth up to $1 trillion if Musk achieves all performance targets over the next 10 years, bringing Tesla's market cap to $8.5 trillion.
What are the goals of Musk's Tesla pay package?
Goals include increasing market capitalization to $2 trillion, selling 11.5 million additional vehicles, commercializing one million humanoid robots, and reaching $400 billion in adjusted EBITDA.
How many Tesla shareholders approved Musk's compensation?
Over 75% of votes cast supported the record-setting pay package for CEO Elon Musk.
Why did some investors oppose the Tesla pay package?
Major institutional investors and proxy advisers expressed concerns about the "astronomical" magnitude of the compensation and potential conflicts of interest in corporate governance.
When can Musk sell the shares from the new pay package?
Musk can immediately vote with earned shares but cannot sell them until they vest, scheduled for 7.5 or 10 years after unlocking each tranche.
What happened to Musk's 2018 Tesla pay package?
The 2018 compensation was rescinded by a Delaware court in January 2024 for lack of transparency; Tesla is appealing to the state Supreme Court.
Will Tesla invest in Elon Musk's xAI startup?
A proposal to authorize xAI investments received more favorable votes than against, but with many abstentions; the board will consider next steps.
What are the risks of a "moonshot" pay package like Musk's?
Risks include excessive costs if targets prove easier than expected, or CEO demotivation if goals become unattainable, compromising retention.