Tesla Board To Shareholders: Give Musk $1 Trillion Or Watch The Company Collapse

Tesla shareholders face an unprecedented decision Thursday as they vote on CEO Elon Musk’s nearly $1 trillion compensation package—with Board Chair Robyn Denholm warning that rejecting it could trigger Musk’s departure and send the company’s stock into freefall. The vote, taking place at Tesla’s annual meeting on November 6, has divided major institutional investors and sparked fierce debate about whether this represents good governance or corporate extortion.

Online votes must be submitted by 11:59 PM ET tonight, November 5, setting up what analysts are calling one of the most consequential shareholder decisions in corporate history.

The Stakes: $1 Trillion For Performance—Or Nothing

The proposed compensation package would grant Musk up to 12% additional Tesla stock over the next decade, but only if he hits extraordinarily ambitious targets. According to Tesla’s regulatory filing, Musk must drive the company’s market capitalization from roughly $1.1 trillion today to $8.5 trillion—making Tesla more valuable than any company in history.

Additional milestones include growing annual operating profit from $17 billion to $400 billion, delivering 20 million vehicles cumulatively, producing 1 million operating robotaxis, manufacturing 1 million Optimus humanoid robots, and securing 10 million Full Self-Driving subscriptions. If Musk falls short on any of these targets, he receives nothing from the package.

Denholm framed the choice starkly in her letter to shareholders: “Without Elon, Tesla could lose significant value, as our company may no longer be valued for what we aim to become.” The board argues that only Musk can transform Tesla from an automaker into what it calls “a transformative force reimagining the fundamental building blocks of mobility, energy and labor.”

Major Investors Split On Historic Payout

The compensation proposal has created deep divisions among Tesla’s shareholder base. Norway’s sovereign wealth fund, which holds a 1.16% stake worth approximately $11.6 billion, announced it would vote against the package.

Norges Bank Investment Management explained: “While we appreciate the significant value created under Mr. Musk’s visionary role, we are concerned about the total size of the award, dilution and lack of mitigation of key person risk.”

California’s massive public pension fund CalPERS, holding approximately 5 million shares, also voted no.

New York State Comptroller Thomas DiNapoli went further, telling shareholders the proposal is “indefensible in both scale and design” and would “hand him another massive fortune while severely watering down the holdings of every other shareholder,” according to his official statement.

Both major proxy advisory firms—Institutional Shareholder Services (ISS) and Glass Lewis—recommended shareholders vote against the package, calling it excessive and warning it reduces the board’s ability to adjust future compensation.

On the opposing side, Baron Capital Management, ARK Invest’s Cathie Wood, and Florida’s State Board of Administration strongly support the proposal.

Tech CEO Michael Dell defended it on X, stating: “The award is only achieved IF he hits exceptionally ambitious market-cap and operational milestones—if he falls short, he gets nothing.”

The Delaware Court Battle That Started It All

This vote represents Tesla’s second attempt to compensate Musk after a Delaware court twice rejected his 2018 pay package. In January 2024, Chancellor Kathaleen McCormick voided the original $56 billion compensation plan, ruling that Musk engineered it through “sham negotiations with directors who were not independent.”

The judge found that Tesla’s board failed to prove the compensation was fair and noted that directors had “excessive compensation” themselves and “thick ties” to Musk, including General Counsel Todd Maron, who had been Musk’s divorce attorney.

When shareholders voted in June 2024 to reinstate the package with 84% approval, McCormick rejected that ratification attempt in December, calling the sum “unfathomable” and awarding $345 million in legal fees to the plaintiff’s attorneys.

Less than an hour after the original January 2024 ruling, Musk posted on X: “Never incorporate your company in the state of Delaware.” Tesla quickly moved to reincorporate in Texas, where shareholders approved the change and where state law provides more favorable terms for corporate leadership.

Texas Law Gives Musk Unprecedented Leverage

The reincorporation in Texas fundamentally changed the dynamics of this vote. Under Delaware law, Musk could not vote his own shares on compensation packages. But under Texas law, he can—and with his 15.3% stake (including restricted stock), Musk wields significant voting power on his own compensation.

Texas also passed legislation in May 2025 that makes shareholder lawsuits far more difficult by requiring plaintiffs to hold at least 3% of the company’s stock—a provision Tesla has adopted. The original plaintiff who challenged Musk’s 2018 package owned just nine shares when he filed suit.

Prediction markets give the package a 91-94% chance of passing, with retail investors—who comprise 30-40% of Tesla’s shareholder base—expected to support Musk overwhelmingly.

Tesla’s Business Reality: Energy Thriving, EVs Struggling

The vote comes as Tesla’s core automotive business shows concerning signs while its energy division flourishes. In Q3 2025, Tesla reported record vehicle deliveries of 497,099 units, but year-to-date deliveries through September stood at approximately 1.2 million—down 6% compared to the same period in 2024.

Tesla’s Q3 earnings showed revenue of $28.1 billion (up 12% year-over-year) but operating income plummeted 40% to $1.6 billion. The company’s automotive gross margins remain compressed despite price stabilization.

The bright spot was energy storage, which deployed a record 12.5 GWh and saw revenue jump 44% to $3.42 billion. Tesla’s energy business now represents about one-quarter of overall revenue, with xAI—Musk’s artificial intelligence startup—being a major buyer of Megapack battery systems.

Notably, Q3 deliveries benefited from customers rushing to purchase vehicles before the federal EV tax credit expired on September 30, 2025. Musk warned in July that Tesla could face “a few rough quarters” as demand normalizes after this pull-forward effect.

Governance Experts Warn Of “Key Person Risk”

Corporate governance professors have expressed alarm at the board’s framing of the vote. Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware, told Reuters that Tesla’s board is being “held over the barrel by a ‘superstar CEO.’”

“To me the appropriate answer is to say, ‘Have a good day,’” Elson said, suggesting the board should call Musk’s bluff rather than capitulate to what he characterized as extortion.

Gautam Mukunda, a lecturer at Yale School of Management, argued that Musk already owns enough Tesla stock to become the world’s first trillionaire if he meets the board’s performance goals.

“This is a guy who’s holding a gun to his own head, saying: ‘Give me a trillion dollars,’” Mukunda said. “It’s not the job of the board of directors to just nod like a bobblehead doll when the CEO asks them for something.”

David Larcker, director of the Corporate Governance Research Initiative at Stanford University’s business school, acknowledged the board’s economic rationale:

“If you think that Musk would potentially leave and the Tesla stock would crater, that’s not something you want to have happen on your watch.”

But institutional investors emphasized that staking everything on one person creates unacceptable risk. CalPERS and other major funds argue that “key person risk”—the danger that a company’s value depends entirely on one individual—should be mitigated, not rewarded with ever-larger compensation packages.

EVXL’s Take

This isn’t Tesla’s first rodeo with Musk’s compensation demands, and as we warned in October, the board’s apocalyptic framing—vote yes or Tesla becomes “just another car company”—feels less like governance and more like a hostage negotiation.

The irony here is striking. Tesla just reported that its EV deliveries are down 6% year-to-date while its energy storage business is absolutely crushing it with 44% growth. So the business that doesn’t require Musk’s daily attention is thriving, while the one he’s supposedly indispensable for is struggling. That should tell shareholders something.

Let’s be clear about what this package really represents. If approved, Musk would own about 25% of Tesla’s voting shares, giving him near-dictatorial control while other shareholders watch their ownership get diluted. And he gets to vote on whether to give himself this windfall—a privilege Tesla secured by fleeing to Texas after Delaware courts called out the obvious conflicts of interest.

The timing is particularly galling. The federal EV tax credit just expired on September 30, making Tesla vehicles instantly $7,500 more expensive for buyers. Tesla’s Q3 numbers looked good partly because customers rushed to buy before that deadline. Now the company faces what Musk himself admitted will be “a few rough quarters”—but apparently he needs a trillion-dollar incentive to navigate challenges that every other automaker faces without holding shareholders hostage.

We’ve covered Musk’s divided attention extensively, from state treasurers demanding he focus on Tesla to his political entanglements affecting the brand. Yet the board’s message is essentially: pay him more or he’ll focus even less.

The governance experts have it right. If Musk truly believes Tesla can become the world’s most valuable company through robotaxis and humanoid robots, why does he need an additional $1 trillion in stock to stay motivated? Either he believes in the mission or he doesn’t. Real leaders don’t require constant appeasement through ever-escalating payouts.

Major institutional investors like Norway’s sovereign wealth fund and CalPERS are voting no for good reason: this package represents terrible governance, excessive dilution, and dangerous dependence on one person. The fact that retail investors will likely override these concerns and approve it anyway doesn’t make it the right decision—it just means Musk has successfully cultivated a cult of personality that treats skepticism as heresy.

Tesla’s success shouldn’t hinge on whether one man is satisfied with his compensation. If the board truly believes the company collapses without Musk, they should be building succession plans and institutional knowledge, not handing over a trillion-dollar ransom note.

What do you think? Share your thoughts in the comments below.