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Chairpersons

Tesla Board Chairperson Defends Elon Musk's $1 Trillion Pay Package

Strategic Insights

— 2 min read

Tesla board chairperson Robyn Denholm has written an open letter to shareholders defending Elon Musk's $1 trillion pay package, which has come under criticism from proxy advisory firms ISS and Glass Lewis. Denholm urges shareholders to ignore the advice of ISS and Glass Lewis and vote in favor of the package, which she describes as a "performance incentive award" that is contingent on delivering products that support Musk's vision for Sustainable Abundance and creating extraordinary shareholder value.

In the letter, Denholm addresses several key concerns raised by ISS and Glass Lewis, including the potential for dilution and the ease of achieving product goals. She argues that the package is designed to promote long-term value creation and that the proxy advisors' criticisms are misguided.

Key Takeaways:

  • The 2025 CEO Performance Award is a "performance incentive award" that is contingent on delivering products that support Musk's vision for Sustainable Abundance and creating extraordinary shareholder value.
  • The award is designed to promote long-term value creation and is not a guaranteed pay package.
  • The award channels Elon's desire for a stable ownership structure to promote extraordinary growth into what shareholders actually care about: sustained, long-term value creation.
  • The proxy advisors' recommendations are misguided and ignore the unique characteristics of Tesla's business model and growth prospects.
  • The Special Committee undertook a seven-month long process to design and negotiate the 2025 CEO Performance Award, and most importantly, even following that rigorous process, shareholders still have the final say.
  • Governance is not an end in and of itself, but a necessary ingredient for durable, long-term value creation.
  • Tesla's stock has delivered annualized returns of almost 50% since the beginning of 2018, far outpacing the broader market.

Statistics:

  • The 2025 CEO Performance Award channels Elon's desire for a stable ownership structure to promote extraordinary growth into what shareholders actually care about: sustained, long-term value creation.
  • The award delivers enormous upside to shareholders, who will receive approximately nine-tenths of the value created.
  • If Elon doesn't deliver sustained increases in market capitalization to validate the success of any product goal, he will earn nothing under such product goal.
  • The 2025 CEO Performance Award is designed to see Tesla grow larger than any company in history, with each and every operational milestone, including the product goals, must be validated by an extraordinarily ambitious -- and sustained -- increase in market capitalization.
  • Voting rights on a tranche are only earned after shareholders win -- and win big -- and are delayed for at least 7.5 years.
  • Tesla's stock has delivered annualized returns of almost 50% since the beginning of 2018.

Sources:

  • Times of India (TOI)
  • X (formerly Twitter)
  • Tesla Board Meeting materials
  • ISS and Glass Lewis proxy advisory reports

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