Elon Musk and Tesla’s board keep repeating the threat that the CEO will leave if shareholders don’t approve his ridiculous new compensation package.
This is not happening and amounts to nothing more than blackmail.
Musk is not new to blackmailing Tesla shareholders.
It started in 2024, when Musk threatened to stop building AI products at Tesla unless he gained control of 25% of the company’s shares.
That’s even though he had claimed Tesla was now an “AI company” and that AI products were “critical to Tesla’s future”. Furthermore, the fact that he didn’t have close to 25% control was due to his own doing: selling Tesla shares to buy Twitter.
The CEO insists that his request for more shares is not about the money that comes with them but to have “control” over the AI products, especially the robots, that Tesla may eventually produce.
The problem with this narrative is that Musk consistently ignores other ways to increase his stake in Tesla without issuing more stock options, such as stock buybacks.
Lately, and amid an upcoming shareholders’ vote on a new CEO compensation package proposed by Tesla’s board, Musk has updated his threat from “not building AI products at Tesla” to “leaving Tesla”.
The CEO has both made the threat directly and through the company’s board over the last week.
Elon Musk already has full control over Tesla
The board is framing the compensation package, which is worth up to $1 trillion, as a way to keep Musk motivated to work at Tesla.
Meanwhile, Musk says he wants the extra shares to boost his stake and gain more control over what he claims will be a “robot army” Tesla will soon build.
There are issues with both claims.
First off, Musk is already the largest individual shareholder in Tesla and therefore, he benefits the most from Tesla’s share price increase. He should already have plenty of motivations.
Other CEOs, such as Jeff Bezos, notoriously didn’t give themselves any stock options to run their companies for that specific reason.
Others, such as Musk’s close friend Larry Ellison, did stock buybacks at Oracle rather than granting himself stock options to increase his stake in the company, benefiting all shareholders.
Secondly, Musk already has full control over Tesla.
Can anyone name a single instance over the last 20 years of Tesla’s existence where Musk didn’t get his way?
He was even caught lying to shareholders by the SEC, yet instead of being banned from running Tesla, he was allowed to retain his role as CEO and had to step down only as Tesla’s chairman for three years.
Musk installed a puppet chairperson who has been doing precisely what he wants for the last 7 years, including proposing increasingly more ridiculous CEO compensation plans.
Furthermore, Tesla has a strong retail shareholder base that believes everything he says and approves of these ridiculous CEO compensation plans.
There’s literally no evidence that Musk is lacking control over Tesla.
Why Elon Musk won’t leave Tesla
Musk and the board are trying to frame this as a confidence vote because that’s a lot easier to pass than giving up to $1 trillion to the CEO, but I don’t think Musk has any intention of leaving Tesla.
As I wrote in the last section, he already effectively controls Tesla.
If he were to leave, he would likely sell his shares, as he is not known to invest in companies that he is not actively involved in. For example, he invested in Twitter only a few months before he went for a full takeover.
As we have previously highlighted in the Tesla dilemma report, Musk’s leaving would likely result in a short-term crash in Tesla’s share price, as most of the company’s market capitalization currently hinges on Musk’s claims that Tesla is on the verge of solving self-driving and that its humanoid robot program is worth trillions of dollars.
There’s little to no evidence to support either of those claims. Shareholders believe it because of Musk. If Musk leaves, he will leave behind the belief in those programs.
Therefore, Musk’s stake in Tesla would be worth much less if he left.
Furthermore, the sale of his Tesla shares is likely to put tremendous pressure on the share price, resulting in him getting a lot less for them.
All of these things are self-defeating for Musk.
Electrek’s Take
Musk is bluffing. Plain and simple.
There are a few things that are incredibly wrong about this stock compensation package, and these blackmailing threats are forcing shareholders to ignore them.
First off, shareholders like to focus on Musk only getting paid if Tesla’s stock continues to increase, which is technically true, but not the proper way to look at it.
The way the plan is structured, Musk could get the first few tranches of the compensation plans over the next 10 years, while Tesla returns below the S&P average returns. That makes no sense.
Why give the CEO up to $40 billion, the biggest CEO pay ever, for returning below average returns?
The go-to argument from Elon fans is: you don’t want him to get paid?
The problem with that is Musk is the one who is forcing this all-or-nothing compensation plan. It’s like the board is also having shareholders vote on a more reasonable compensation package.
If you are to believe Musk and the board, you give him the most ridiculous compensation package of all time, or he leaves.
You should be extremely wary of anyone giving you such a choice.
Lastly, I want to highlight that the compensation package’s milestones are poorly designed. Why is delivering unsupervised self-driving as promised and sold to customers for almost a decade not in the milestones?
Instead, there are things like “10 million active Full Self-Driving”, which could be achieved without delivering the promised unsupervised self-driving, and “1 million Robotaxis in commercial operation”, which has the same issue, considering Tesla counts its ride-hailing service on FSD as “robotaxis”.
The compensation package is designed to be abused and benefit Musk way more than the shareholders.
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