Tesla’s (TSLA) board of directors is urging shareholders to back what could become the largest compensation package in corporate history. Investors will vote Thursday on whether to approve Musk’s $878 billion in potential stock awards, a proposal that has divided both analysts and governance exp
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The board has made its stance clear, telling investors they can either pay Musk or risk losing him.
The decision, experts say, amounts to a referendum on whether traditional corporate-governance rules apply to the world’s richest man. The package ties Musk’s compensation to Tesla’s long-term performance goals, which could see the company’s valuation surge to $8.5 trillion if fully met.
The board and many shareholders argue that only Musk can deliver on his vision of transforming Tesla into an artificial intelligence powerhouse, complete with fleets of self-driving robotaxis and humanoid robots. “If the stock is going to go up sixfold – and that’s a requirement here – then I’m going to make a lot of money,” said Nancy Tengler, CEO and chief investment officer of Laffer Tengler Investments. “Why do I care what kind of money he makes if he’s effecting the change and the vision?”
Governance Critics Sound the Alarm
Critics warn that the proposal represents a major risk to shareholders. Several governance experts argue that tying Tesla’s future so closely to one leader with “myriad conflicts of interest” is a mistake. They point to Musk’s growing influence across multiple ventures, from SpaceX to xAI and Neuralink, as a sign that he already holds enormous sway over the board.
Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware, called the situation “being held over the barrel by a ‘superstar CEO.’” He added, “To me the appropriate answer is to say, ‘Have a good day.’”
Large institutional investors have also pushed back. The California Public Employees’ Retirement System (CalPERS) and Norway’s sovereign wealth fund both publicly opposed the plan, saying it could dilute shareholder value and deepen Tesla’s dependence on Musk. Norges Bank Investment Management said the pay proposal failed to mitigate “key person risk.”
Supporters Point to Track Record
Some governance experts, however, say the package aligns Musk’s interests with shareholders by linking compensation directly to performance. “The numbers are big because the goals are big,” said Krishna Palepu, professor at Harvard Business School. Palepu argued that Musk’s track record of driving massive stock-price growth justifies the scale of the reward, noting that the plan requires him to hold any shares earned for at least five years.
From a practical standpoint, the board’s stance may be rooted in fear of what would happen if Musk actually walked away. David Larcker, director of the Corporate Governance Research Initiative at Stanford University, said, “If you think that Musk would potentially leave and the Tesla stock would crater, that’s not something you want to have happen on your watch.”
The “Classic Holdup” Risk
Musk’s power in this debate lies in Tesla’s market value. The company’s $1.5 trillion capitalization rests largely on investor confidence in his vision rather than its current fundamentals. That leverage allows him to make demands that few CEOs could.
In a letter to shareholders, board chair Robyn Denholm made the stakes plain: “Without Elon, Tesla could lose significant value, as our company may no longer be valued for what we aim to become.”
Some experts say the dynamic reflects a “classic holdup.” Charles Whitehead, a Cornell University business law professor, said the board has failed to answer one crucial question: “Who is on the bench to backstop this CEO if he walks away or, God forbid, if something happens to him.”
Vote Could Impact Tesla’s Future
Musk enters Thursday’s vote holding a 15% stake in Tesla, a potentially decisive block. Under Texas law, where Tesla is now incorporated, he is allowed to vote his own shares, unlike in previous pay votes. That change, along with a Texas rule making shareholder lawsuits more difficult, may give the board greater room to maneuver.
Still, many investors see the moment as a defining one for Tesla. Critics say it will test whether any board can stand up to a CEO with Musk’s influence, while supporters see it as necessary to keep the visionary who built Tesla’s trillion-dollar brand.
As Gautam Mukunda of Yale School of Management put it, “This is a guy who’s holding a gun to his own head, saying: ‘Give me a trillion dollars.’ It’s not the job of the board of directors to just nod like a bobblehead doll when the CEO asks them for something.”
Is Tesla Stock a Buy, Hold, or Sell?
Currently, Wall Street has a Hold consensus rating on Tesla stock based on 16 Buys, 13 Holds, and 10 Sell recommendations. The average 12-month TSLA stock price target of $366.35 implies a 16.6% downside from the current level.
