Tesla Board Warns of Potential Musk Exit if Shareholders Reject New Compensation Plan

Tesla’s board of directors is urging investors to approve Chief Executive Officer Elon Musk’s proposed compensation plan, valued at nearly $1 trillion, ahead of the electric-vehicle maker’s annual meeting. Board chair Robyn Denholm told shareholders in a letter released Monday that Musk’s continued leadership is critical as Tesla seeks to expand beyond automobiles into autonomous driving and robotics.

The company will hold its annual meeting on Nov. 6, and voting on the compensation proposal closes at 11:59 p.m. ET on Nov. 5. Denholm wrote that Tesla is “at an important inflection point,” highlighting artificial-intelligence initiatives such as the Full Self Driving software and the humanoid Optimus robot. According to Denholm, the pay package is intended not only to reward performance but also to ensure Musk retains sufficient voting influence to guide these projects.

The plan, first detailed by the board in September, would grant Musk 12 tranches of stock options if Tesla meets a series of market-capitalization and operational milestones. If fully earned, the award would provide Musk with more than 423 million additional shares, increasing his ownership from roughly 13% to about 25%. The expanded equity stake would bolster Musk’s voting power, something he has publicly requested over the past year. During the company’s third-quarter earnings call last week, the CEO reiterated that he wants “strong influence” over Tesla’s future, especially if large numbers of Optimus robots are deployed.

Denholm described the proposal as “less about compensation and more about the voting influence,” asserting that the board sees Musk’s role as indispensable. “Without Elon, Tesla could lose significant value, as our company may no longer be valued for what we aim to become,” she stated in the letter. She also emphasized that roughly 30% of Tesla’s shareholder base consists of retail investors and noted that last year produced record voter turnout.

Opposition to the pay package has emerged in recent days. Proxy advisory firm Institutional Shareholder Services recommended that investors vote against the plan. In addition, a coalition of labor unions and corporate-governance organizations launched the “Take Back Tesla” campaign, criticizing Musk’s public alignment with right-leaning political positions and his amplification of conspiracy theories. The group argues that these actions have harmed Tesla’s brand and could weaken its competitive standing.

Tesla’s financial performance has added context to the debate. The company reported third-quarter earnings last week that fell short of Wall Street expectations, although revenue rose 12% after two consecutive quarterly declines. Those results underscored both the challenges and growth opportunities the automaker faces as it scales new products and technologies.

Denholm appeared on CNBC on Monday to reinforce the board’s stance, stating that Tesla’s AI capabilities present a “significant opportunity” that requires Musk’s stewardship. She also asked shareholders to re-elect directors Ira Ehrenpreis, Joe Gebbia and Kathleen Wilson-Thompson, whose terms are up for renewal at the meeting.

Imagem: Internet

If approved, the compensation package would become one of the largest in corporate history. The structure is similar to Musk’s 2018 award, which tied payouts to ambitious market-cap and operational targets. While that earlier plan was controversial, Tesla eventually met each threshold, propelling the company’s valuation above $1 trillion in 2021. Details on the new proposal are available in Tesla’s filings with the U.S. Securities and Exchange Commission.

Critics contend that the latest award is excessive and concentrates too much control in the hands of a single individual. Supporters counter that Musk’s leadership has been instrumental in Tesla’s rise and that retaining him is essential as the company ramps up autonomous driving, expands battery production and develops AI-powered robots.

The shareholder vote will determine not only Musk’s future compensation but also the governance structure under which Tesla pursues its AI-driven ambitions. Investors must weigh the potential benefits of retaining Musk’s leadership influence against concerns about corporate oversight and brand risk.

Crédito da imagem: CNBC