Tesla indicated that shareholders voted in support of CEO Elon Musk’s almost $1 trillion pay plan, with 75 percent of voting shares approving it.
Shareholders voted on a pay plan proposed by Tesla’s board in September. However, Glass Lewis and ISS, the leading proxy advisors, recommended voting against the plan.
The outcome of the vote was announced on Thursday during the annual shareholders meeting of the company in Austin, Texas.
An individual proposal, put forward by one investor, Stephen Hawk, requested that Tesla be given the option to invest in xAI, which Musk had established in March 2023 to compete with OpenAI, an artificial intelligence start-up.
General Counsel of Tesla, Brandon Ehrhart, stated at the meeting that the company had “received more votes in favor than we did in against,” but that there were sufficient abstentions and that Tesla is evaluating ways forward.
The compensation package of Musk, who is already the richest person in the world, includes 12 tranches of shares to be awarded to Musk in case Tesla achieves some milestones within the next decade.
Therefore, it would also grant Musk more voting control within the company, to satisfy demands that he has publicly made since early 2024. His ownership would result in an increase in the stock from 13 percent to 25 percent, including more than 423 million shares in his holdings.
The initial tranche of stock will be paid out in case Tesla reaches a market capitalization of $2 trillion. Hence, the current market cap of Tesla is $1.54 trillion.
Awards initiated to market cap gains are paired with operational achievements.
The following nine tranches would be granted in case the value of Tesla grows by $500 billion, up to 6.5 trillion.
Musk would get the final two tranches once the market cap has increased by $1 trillion increments, which means that it would have to reach $8.5 trillion before Musk is fully vested.
Tesla also established a set of revenue milestones that Musk would achieve, starting with the target of $50 billion in annual adjusted profit and then rising to $400 billion.
Tesla has seen adjusted EBITDA of $4.2 billion in the third quarter.
Other objectives associated with the newly approved pay plan are the 20 million vehicles delivered, 10 million subscriptions of FSD (Full Self-Driving) in operation, 1 million bots (Optimus humanoid robots) delivered, and 1 million robotaxis in commercial operation.
According to its September proxy statement, Tesla has supplied over 8 million vehicles so far. The proposed plan does not point out whether the FSD subscriptions would be a purchase or would have to include free trials.
Tesla already offers partially automated driving systems, which it sells as FSD Supervised in the U.S. The company will ensure that it enhances its “FSD Supervised” systems in such a way that they would not need human supervision on the board.
During the meeting, Musk said that Optimus robots “will eliminate poverty,” “give everyone amazing medical care,” and will be “bigger than cell phones, bigger than anything.”
He also added that the robots can be used to “containment of future crime” by following criminals around and stopping them from “doing crime.”
An Optimus robot is not being sold at the moment, and Musk did not have a date for when he is going to hit those goals.
As Reuters already reported, Musk can even make tens of billions of dollars without achieving most of the targets that were set in front of him by the board, gathering over $50 billion by simply reaching some of the more realistic targets.
The award terms also include a list of so-called “covered events” according to which Musk would receive shares without achieving the necessary milestones in terms of operation.
The covered events involve natural disasters, wars, pandemics, and changes to “international, federal, state and local law, regulations or other governmental action or inaction,” that could cripple the company’s ability to design, manufacture, or sell its products in the future.
The new plan was posted to the shareholders after the Delaware Court of Chancery concluded that the previous 2018 plan of remuneration that Musk received was granted inappropriately by the Tesla board last year and that it should be rescinded.
Musk appealed this decision, and the case will be determined by the Delaware State Supreme Court.
Besides being the head of Tesla, Musk also owns xAI, which merged its operations with X, SpaceX, as well as its satellite internet company Starlink, and is a co-founder of brain computer interface company Neuralink and tunneling venture The Boring Company.
He has also been highly involved in politics, specifically pushing President Donald Trump back to the White House, and then spearheading an extensive initiative to cut the federal government at the start of his second term.
A paper released last month by the National Bureau of Economic Research estimated that Tesla in the US in the last four months of 2022 and the first four months of this year would have been 67 to 83 percent higher without Musk’s “polarizing and partisan actions.”
The pay plan that has just been approved does not impose any restrictions on the political activity of Musk, and does not stipulate a minimum number of years he needs to spend working in Tesla.
