Shareholders must vote to pay Tesla CEO Elon Musk almost $1 trillion, or he might not stay, Board Chair Robyn Denholm warned in a letter Monday.
“Without Elon, Tesla could lose significant value, as our company may no longer be valued for what we aim to become,” Denholm wrote ahead of Tesla’s annual meeting on Nov. 6.
Online shareholder votes regarding Musk’s new pay plan and other proposals must be received by Tesla by or before 11:59 p.m. ET on Nov. 5.
Musk is key to the future of the EV maker as it moves beyond being “just another car company,” with a bigger focus on Full Self Driving and Optimus, Denholm argued.
In May this year, as Musk faced criticism for neglecting Tesla while working for President Donald Trump, the billionaire CEO said he was committed to running his auto business for the next five years.
Several groups have publicly opposed the pay package in recent days, with Institutional Shareholder Services, the biggest proxy advisory firm in the world, recommending against its “astronomical” value.
Last week, a group of unions and corporate watchdogs launched the Take Back Tesla website to oppose the pay package, noting Musk’s embracing of right-wing political movements and amplifying of conspiracy theories that have damaged the brand.
Musk lashed out at top proxy advisors ISS and Glass Lewis, calling them “corporate terrorists” on an earnings call with analysts last week.
ISS said it stands by its report. A spokesperson for Glass Lewis told CNBC, via e-mail, “Our job as a proxy advisor is to provide informed analysis and recommendations to our clients worldwide. Those that are Tesla shareholders will ultimately make their own decisions about Mr. Musk’s pay proposal and the Board directors that put it forward for shareholder vote.”
Denholm told CNBC’s “Squawk Box” on Monday that the company is at an “important inflection point” with artificial intelligence at the forefront.
“The opportunity for Tesla in the future, given this AI focus and attention and the unique capabilities that we have as an organization, and that Elon brings to us, really does mean that the opportunity for the company ahead of us is significant,” she said.
Tesla reported third-quarter financials last week, missing earnings expectations but posting a 12% increase in revenue after two straight periods of declines.
The proposed plan for Musk, which was outlined by the board in September, consists of 12 tranches of shares granted to Musk if Tesla hits certain milestones.
The first tranche milestone is a market capitalization of $2 trillion. The company is currently worth about $1.5 trillion.
The next nine tranches are awarded as the market cap increases by increments of $500 billion, up to $6.5 trillion. The last two tranches bump the increment to $1 trillion, putting a $8.5 trillion market capitalization as the last tranche.
Product goals tied to the pay package:
- 20 Million Tesla Vehicles Delivered
- 10 Million Active FSD Subscriptions
- 1 Million Bots Delivered
- 1 Million Robotaxis in Commercial Operation
There are also a series of adjusted EBITDA milestones, beginning at $50 billion and moving up to $400 billion.
As Reuters previously reported, Musk could still score tens of billions of dollars without meeting most of the targets laid out for him by the Tesla board, collecting more than $50 billion just by hitting a handful of attainable goals.
The proposed pay package would also give Musk increased voting power over the company, which he has publicly demanded for the past year and mentioned again on Tesla’s earnings call last week in reference to the growth of Optimus robots.
“If we build this robot army, do I have at least a strong influence over that robot army?” Musk said to analysts. “I don’t feel comfortable building that robot army if I don’t have at least a strong influence.”
The full award would give Musk, who already holds about 13% of the EV maker, more than 423 million additional shares and take his stake to about 25%.
“He’s been very consistent in that view, in terms of having enough influence over the vote of Tesla in the future so that bad things can’t happen with the AI,” Denholm told CNBC. “So it’s less about compensation and more about the voting influence.”
Denholm, who noted that retail traders make up about 30% of Tesla’s shareholder base, said last year was a record turnout for the vote.
She also asked that shareholders vote to re-elect Ira Ehrenpreis, Joe Gebbia and Kathleen Wilson-Thompson to the board.
Tesla year-to-date stock chart.
5 quotes from Denholm’s “Squawk Box” interview:
On Musk’s pay package and shareholder value:
“What we have done in the plan is we’ve bifurcated the voting rights versus the economic value. He doesn’t get those economic value till at least year seven and a half, even if he delivers them in the first five years. And so that’s one of the features of this plan. … Firstly, shareholders get their return much earlier than Elon would if he delivers against the plan. And secondly, it really does make sure that the economic value is an incentive for him to stay at the company and continue to deliver for quite some time in the future.”
On the upcoming Roadster:
On autonomous driving and AI in vehicles:
“Leaning into FSD and actually AI in the vehicles has actually been the focus over this last period of time. The integration of that with a really purpose built vehicle for autonomy is actually really important, which is why you see the cyber cabs and, again, the vehicles that we have on the road today. Great vehicles using full self driving as well.”
On vote for Tesla to take a minority stake in xAI:
“It is a shareholder proposal, and what that means is that the company didn’t put the proposal on the proxy. It was actually submitted by shareholders. We received a number of them, and actually this was the most common proposal around xAI to take a minority stake, or at least vote on that.”
On Optimus robots:
“So I’ve been in the lab with Optimus. He can fold laundry. He can wipe the table down really well, where he can hand things to you, you can actually shake hands with him. The tactile nature of his hand is actually really very good. … He’s very mobile and very dexterous. He’s walking around the offices in Palo Alto all the time.”
CNBC’s Lora Kolodny contributed to this story.