Last Updated on: 5th August 2025, 04:37 pm
Dear Tesla Ethicist: As a longtime Tesla shareholder, I’ve been following the ongoing and often tense discussions regarding CEO Elon Musk’s pay. His previous compensation package was struck down last year, as the court ruled that shareholders had not been properly informed of its details. As if that wasn’t enough, the Chancellor also determined that members of Tesla’s board were not sufficiently independent.
Now this week it’s been announced that Tesla has granted shares to Elon Musk worth nearly $30 billion. Typically, executive pay is tied to performance goals, but I don’t see any specific language that requires Musk to do much of anything except maintain a leading position in the company. The current company decline in both vehicle sales and stock valuation has me worried. Should shareholders like me fight back ahead of Tesla’s annual meeting in November, where there will be a vote on a longer-term compensation plan for Musk? I’m not in favor of increasing Musk’s pay any further than the recent award, that’s for sure.
Signed, A concerned Tesla shareholder
Dear concerned Tesla shareholder: Your apprehension is valid. With the new shares, Musk will own nearly 16% of Tesla, or the equivalent of $150 billion, based on Tesla stock price on Monday. Musk is already the world’s richest person, with a real time net worth of $398 billion. Rumors this spring that Tesla board members had contacted corporate recruiters to find a successor to Musk have not panned out. Instead, the Tesla board has approved a grant of 96 million shares for its CEO, which Musk could cash in after two years of service in a senior leadership role.
“While we recognize Elon’s business ventures, interests, and other potential demands on his time and attention are extensive and wide-ranging,” Tesla chair Robyn Denholm and board director Kathleen Wilson-Thompson wrote in an SEC filing, “we are confident that this award will incentivize Elon to remain at Tesla.” Denholm has earned a profit of more than $500 million from Tesla stock options, which she has referred to as “life changing.”
This “good faith” award follows Musk’s public concerns over potentially losing control of Tesla due to the influence of activist shareholders. Former US Labor Secretary Robert Reich says Musk’s statement is just an excuse and fails to ask why shareholders would want Musk removed “if he were doing such a good job at Tesla. The answer is he’s obviously not doing a good job, and he knows it.”
Brad Lander, the New York City comptroller who oversees pension funds that own Tesla shares, seems to agree with Reich. Lander described Musk’s new compensation plan to the New York Times as “obscene,” especially when taking into account that the CEO has been “largely absent” from carrying out his company responsibilities. “Tesla’s captive board is once again enriching Elon Musk at investors’ expense.”
Due to the ability to access news 24/7, consumers care more than ever about CEO pay. Perceptions of CEO pay fairness are strongly linked to corporate governance accountability and subsequent brand ramifications. Many shareholders feel that CEO pay is insufficiently tied to firm performance. Others look at high CEO compensation and see a failure to devote resources toward goals like improving the quality of products and services. High CEO pay, in this regard, is more self-serving than value-based, and it’s the kind of company focus that can erode trust in the brand and negatively impact shareholders’ desire to invest with the firm.
As with any company, Tesla’s CEO’s is in a pivotal position to drive strategy and financial growth. This role is particularly important during periods of uncertainty and transition. CEO pay is a visible marker of trust that a company is operating in the best interests of consumers, as it represents an important element of how boards allocate valuable resources. Yet, according to a study by Williams College, the number of liberal voters who have expressed interest in owning an EV has plummeted into negative figures since Musk began his right-wing political allegiance, and conservatives have failed to embrace EVs in general.
Tesla sales and profits are falling, and the fault largely lies with Musk’s own personal life decisions and controversial political actions. As a result, critics allege that Musk is overpaid compared to his peer CEOs. For example, Microsoft’s Satya Nadella and Google’s Sundar Pichai have led their companies to share price growth without such enormous pay packages. But it’s not just Tesla: CEOs are getting paid more because of their leverage over corporate boards — not because of their skills or contributions they make to their firms, according to the Economic Policy Institute.
The decision by Tesla’s board of directors to give Musk such a rare pay raise invokes a troubling subtext. Instead of focusing on Tesla’s electric vehicles, which revolutionized the automotive industry, the Denholm-led board has sanctioned Musk’s desire to redirect Tesla to Full Self Driving (FSD) robotaxis and artificial intelligence (AI). AI algorithms can process vast amounts of data in real time, allowing autonomous vehicles to navigate roads and react to dynamic conditions. Yet Tesla’s FSD system has never reached its promised potential, instead sputtering in stops and starts over the years.
This is in part due to its “vision only” self-driving system, which has seen many improvements but also has failed when confronted with on-the-edge conditions. Users haven’t seen any quantitative improvement in FSD performance of late. Tesla’s autonomous driving efforts also suffered this week when a Florida jury found the company partially at fault for a 2019 crash that killed a 22-year-old woman and severely injured her boyfriend.
FSD and AI have not produced income for the company yet, and profits drive shareholder value. Then again, another of Musk’s companies, SpaceX, has rockets that the US has come to depend upon to propel astronauts and satellites into space. Just last week Space X delivered four astronauts to the International Space Station in 15 hours after launch. Is his exceptionalism enough so that shareholders should wait until the Musk pendulum of interest swings back to Tesla?
As a Tesla shareholder, you have every right to speak out and advocate for Musk’s pay package to be reasonable and in keeping with company success. Perhaps you should consider other paths to CEO reform as well. You can be a voice for policies that limit CEOs’ ability to collude with corporate boards. Perhaps this means reinstating higher US income tax rates for the 1%, leveraging shareholder votes on CEO compensation to carry more weight, or insisting that antitrust enforcement and regulation bear down on the largest firms more tightly.
Whatever route you choose, be ready to take a stand that some will find offensive, as charismatic leaders like Musk carry a great deal of cult-like weight.
Featured image: “Elon Musk Presenting Tesla’s Fully Autonomous Future” by jurvetson, licensed under CC BY 2.0.
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