Tesla’s Musk says $1 trillion pay deal about voting control, not money

Tesla CEO Elon Musk jumped in at the end of the automaker’s earnings call to express to investors why they should approve the trillion-dollar pay package, arguing that it’s not necessarily about the money but about having enough power at the head of the company.

“The point is I like… to have enough voting control to have a strong influence, but not so much that I can’t fire me if I get crazy,” he said moments after Tesla CFO Vaibhav Taneja asked shareholders to support Musk’s leadership with compensation proposals and the re-election of three directors, which would preserve the current leadership structure.

The amount of power someone has to make decisions in a company is determined by the shares they own. Voting control means having enough shares (or voting power) to influence or decide on major company decisions.

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Because Tesla is a public company, Musk said there is no way to increase his voting control because rules prevent creating “super-voting” private shares or changing ownership structures after an IPO.

“But for example, Google, Meta, and a lot of other companies have this, but they had it before they went public. And so, it’s kind of become this thing, I guess. Tesla doesn’t have that. So – like I said, I don’t feel comfortable building an army of robots for it…and then getting fired because of some…recommendations from ISS (Institutional Shareholder Services) and Glass Lewis, who have no idea “Strange.”

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ISS and Glass Lewis are proxy advisory firms that advise investors on how to vote at shareholder meetings.

New Tesla electric cars fill the parking lot of the Tesla retail location on Route 347 in Smithtown, New York, July 5, 2023. (John Paraskevas/Newsday RM via Getty Images / Getty Images)

“The fundamental problem here is that many index funds, passive funds, vote according to what Glass Lewis and ISS recommend,” Musk continued. “Now, they have made many terrible recommendations in the past, which, if those recommendations had been followed, would have been very damaging to the future of the company.”

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Tesla’s board of directors Musk’s new compensation plan was initially proposed in September. It could be worth as much as $1 trillion, representing the largest CEO pay package in history if certain ambitious targets are reached.

The board’s proposal would give Musk, already the world’s richest person, up to 12% of Tesla shares, worth about $1 trillion, if the automaker achieves a market value of $8.5 trillion and other operational milestones over a 10-year period. The company’s current market value is about $1.38 trillion.

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Musk owns about 13% of Tesla’s outstanding shares. The proposed award comes in the form of: restricted stock grants, Which means he can’t sell it right away.

At the time, Tesla CEO Robin Denholm said in a letter to investors that “retaining and motivating Elon is key to achieving these goals and becoming the most valuable company in history.”