Tesla shareholders approve Elon Musk's billion-dollar compensation package

Contents

Tesla shareholders have approved the unprecedented compensation package for CEO Elon Musk. This could allow Musk to earn nearly a trillion US dollars in the coming years by achieving certain company goals, giving him a 25 percent stake in the company. Musk currently holds 13 percent of Tesla. The decision was made at yesterday's annual general meeting of the electric car manufacturer with a majority of over 75 percent of the voting shareholders.

In early September, Tesla had offered Musk the stock package worth one trillion dollars, which shareholders had to decide on. The condition is that Tesla's market capitalization is about six times higher in ten years than it is now. Other conditions include Musk remaining at the helm of the company for the decade, Tesla having one million robotaxis in operation, and delivering one million AI robots. So far, none of these robots, called Optimus, are on the market.

Tesla is heading for its second consecutive year of declining sales. Recently, Tesla reported a sales record, but the rush of customers was due to the impending end of the e-car premium in the USA. However, Musk assures that the future of the electric car pioneer lies in autonomous driving and humanoid robots named Optimus, which are still under development. He recently announced that the robots could account for 80 percent of Tesla's value.

Warnings from major investors and the board of directors

Previously, large and influential investors rejected Musk's billion-dollar compensation package at Tesla. They criticize a lack of oversight and declining company performance. The board's relentless efforts to retain the CEO at all costs have also damaged the company's reputation. On the other hand, Tesla's board of directors warned shareholders that Musk could give up his CEO position without new shares.

Elon Musk would receive nothing if Tesla does not achieve its goals. From the perspective of Tesla's board of directors, the plan offers sufficient incentive to keep Musk's attention. They do not want to lose access to his "time, talent, and vision." Musk himself says that more than the money, he is interested in increasing his Tesla stake to 25 percent and thus securing his influence at the company.

Compensation only upon achievement of high goals

In total, Musk could receive up to 423 million Tesla shares, in several stages, mostly tied to steps of 500 billion dollars in market capitalization. In addition, there are business goals such as the delivery of 20 million Teslas at a market capitalization of two trillion dollars. An even greater challenge will likely be to exceed the brand of 400 billion dollars in adjusted earnings before interest, taxes, and depreciation, in addition to a market capitalization of 6.5 trillion dollars.

Further goals include 10 million active subscriptions of "Full Self-Driving" (FSD). However, it is unclear whether this also includes free trial subscriptions. Tesla currently offers "supervised FSD" in the USA. This semi-autonomous driving system requires a driver's intervention at any time.

Tesla investment in xAI postponed, stock market is pleased

In addition to Musk's stock package, the general meeting was also to decide on possible investments by Tesla in Musk's AI company, xAI, CNBC reported. According to the report, a majority voted in favor, but there were too many abstentions for a decision. Tesla is now considering further steps.

The stock market is reacting positively to the shareholders' decisions. After Tesla's stock price fell by 3.5 percent during the trading day, it is slightly recovering after the stock market closed. Currently, Tesla stock is up around 1.5 percent in after-hours trading.

(fds)