Tesla Inc.’s latest “Master Plan” seemed vague on paper. But the real details soon surfaced in a proxy statement: a proposal for a compensation plan worth nearly $1 trillion for CEO Elon Musk.
The structure of the package not only embellishes Tesla’s vision but also exposes the company’s fragile governance, a concern highlighted by courts and investors.
From Growth to Decline
Over the past two years, Tesla’s once-dominant electric vehicle business has shifted from growth to decline, hit by the much-hyped but underwhelming Cybertruck flop and the growing politicisation of the brand.
Both setbacks are directly tied to Musk. During this period, Tesla’s board has focused less on operational challenges and more on restoring Musk’s massive 2018 pay package, an award struck down by a Delaware court for conflicts of interest and disclosure failures.
The board is now pressing shareholders to revalidate that package, relocate Tesla’s incorporation to Texas, and approve a new stock award plan.
The Interim Fix and the Bigger Play
Tesla has already granted Musk an “interim” award of restricted stock units valued at around $32 billion, vesting if he stays at the company for two years and loses the Delaware appeal. But the new plan goes much further, echoing the 2018 structure but at far loftier thresholds given Tesla’s $1 trillion-plus valuation.
Targets include:
Market cap growth to $8.5 trillion (double Nvidia Corp., the world’s most valuable company today).
Adjusted Ebitda of $400 billion, 26 times current levels.
Delivery milestones for futuristic products such as 1 million humanoid robots and a functioning robotaxi fleet.
The Shift in Tesla’s Narrative
Whatever its feasibility, the package accomplishes one thing: shifting Tesla’s narrative away from struggling EV sales toward AI, robotics, and autonomous driving. These markets are defined less by current numbers and more by boundless projections.
Still, investors face a sobering reality. Tesla’s stock is only 29% higher than three years ago, while the S&P 500 gained more than twice as much. Its forward earnings multiple, however, has tripled, reflecting faith in Musk’s potential rather than profits.
The Fairness Argument—And Its Limits
Proponents argue Musk deserves compensation for Tesla’s massive market cap gains since 2018. Yet, critics note Musk is hardly underpaid. He owns 12.4% of Tesla and sold $39 billion worth of stock around the time he acquired Twitter. On top of that, he now holds the interim award.
The proxy revealed Musk had $79 billion worth of Tesla stock pledged as collateral for personal loans as of August. That disclosure undercuts Musk’s own July claim on X that he isn’t reliant on such financing.
A Board Under Scrutiny
The Delaware court’s rejection of the 2018 package rested not on Musk’s performance but on the board’s governance failures. Tesla’s new Texas-based structure may shield the latest package from similar scrutiny, but it highlights the board’s ongoing weaknesses.
One striking section of the proxy reads: “During negotiations, Mr. Musk reiterated that, if he were to remain at Tesla, it was a critical consideration that he have at least a 25% voting interest in Tesla and that he receive assurances that he would be compensated for his past services in accordance with the 2018 CEO Performance Award. Mr. Musk also raised the possibility that he may pursue other interests that may afford him greater influence if he did not receive such assurances.”
This essentially leaves Tesla shareholders with a warning: Musk may walk if he doesn’t get what he wants.
Competing Interests and xAI
The hostage-like undertones become sharper when considering Musk’s other ventures. He has already launched his own artificial intelligence company, xAI, which now seeks potential investment from Tesla itself. One resolution on the proxy seeks authorisation for Tesla to invest an unspecified sum into xAI—an unusual proposal given xAI’s bonds are trading at a junk-level yield of 12.7%.
The Succession Question
Tesla’s dependence on Musk raises another concern: succession planning. While the proxy claims the board reviews succession regularly, Tesla’s history of senior executive departures and the trillion-dollar package designed to tether Musk to the company suggest otherwise.
In fact, one condition of Musk’s new award is that, to vote the shares from the final tranches, he must develop a succession “framework” of his own. Whether this will result in meaningful planning or simply more concentration of power in Musk’s hands, remains unclear.
Reward or Ransom?
Tesla’s trillion-dollar plan is, on paper, tied to ambitious goals. Yet the reality is that it functions as both a reward and a ransom: shareholders are effectively paying to keep Musk’s vision and Tesla’s inflated valuation alive.
Gunjan Rajput
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