Tesla shareholders should reject a compensation plan that could pay Elon Musk more than $1 trillion over the next decade, proxy advisory firm Institutional Shareholder Services (ISS) said in a report on Friday.
The plan is designed “to retain Musk and keep his time and attention on Tesla rather than his other businesses,” but “there is no prescriptive element in the price to ensure that his attention and time remains on Tesla as opposed to his other businesses, which undermines the primary rationale for the award,” the consultancy said in a report to clients.
The “astronomical value of the award” given to Musk could dilute the value to other shareholders “due to the extreme value and number of shares awarded,” and it is questionable whether the award “is necessary or appropriate to further align his interests (with Tesla) when he currently holds a 19.8% stake in the company,” ISS said.
Tesla’s proposal, scheduled for a shareholder vote on Nov. 6, could give Musk more than 423.7 million Tesla shares and a stake of up to 28.8%. It would be awarded in 12 tranches as Musk achieves each goal outlined in the proposal.
1 trillion dollars
Tesla estimated the value of the shares at $87.8 billion while ISS valued them at $104.4 billion. Using Tesla’s lower valuation, Musk’s ultimate value would exceed $1 trillion if all market cap targets were met.
“Full achievement of the market capitalization milestones requires historic growth of approximately $7.5 trillion (as of the award date) to reach the final target of $8.5 trillion,” the ISS report said. “This would result in a higher market cap than Tesla’s current largest AI competitors combined… If all shares are ultimately delivered and the highest market cap milestone is reached, the potential value of these shares is over $1 trillion.”
Musk’s salary package combines operational goals with market value milestones. The first objective is to deliver 20 million vehicles while reaching a market valuation of $2 trillion. Other goals include obtaining 10 million Full Self-Driving subscriptions, delivering 1 million “AI robots,” commissioning 1 million robotaxis, and achieving $400 billion in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization).
