Tesla shareholders approve Musk's $1 trillion package as sales decline 13%
A court found the board 'beholden' to Tesla's chief in 2024. Eighteen months later, shareholders voted overwhelmingly for even larger compensation during sales decline.
Surrounded by dancing humanoid robots that cannot yet walk reliably, Elon Musk thanked Tesla shareholders for approving what could become a $1 trillion compensation package. More than 75% voted yes. The spectacle at Tesla's Austin headquarters revealed something essential about contemporary capitalism: shareholders of a company with declining sales and distracted leadership voted overwhelmingly to enable wealth extraction at a scale exceeding the GDP of most nations.
Tesla's vehicle sales fell 13% in the first half of 2025, according to the Wall Street Journal. During those months, Musk ran the Department of Government Efficiency in Washington until May, then turned his attention to his artificial intelligence startup xAI. At the shareholder meeting, Tesla's General Counsel Brandon Ehrhart confirmed that a proposal allowing the board to invest in xAI received more votes for than against, though substantial abstentions signalled discomfort with this obvious conflict.
The package could give Musk 25% ownership of Tesla, up from his current 15% stake. It requires the company's market capitalisation to grow from $1.5 trillion to $8.5 trillion over the next decade. Additional milestones include selling 20 million vehicles annually, maintaining adjusted earnings of $400 billion (compared to $16 billion last year), delivering one million Optimus robots, and operating one million robotaxis with 10 million Full Self-Driving subscriptions.
Most of these products don't yet exist as commercial realities. The milestones assume growth rates unprecedented in competitive global markets. Yet shareholders found this irrelevant.
When judicial oversight cannot contain governance capture
Eighteen months earlier, a Delaware judge ruled that Tesla's directors were "beholden to Musk" and that the approval process for his 2018 compensation package was "tainted and lacked transparency." That package, previously the most valuable on record, remains under appeal after the court ordered it rescinded.
The judicial finding was blunt: the board had failed its fiduciary duty, conflicts of interest had corrupted the process, and shareholders had been misled. One might expect such condemnation to introduce scepticism toward subsequent compensation proposals.
Instead, within 18 months, the same board proposed and shareholders approved a package worth five times more.
This reveals something fundamental about governance reform. Courts can invalidate compromised decisions, but they cannot prevent shareholders from ratifying identical compromises. When voting mechanisms become captured by personality dynamics, legal remedies fail. Shareholders were asked to approve the very governance failures judicial oversight had condemned. They voted yes.
Coercion masquerading as incentive alignment
Corporate governance theory assumes compensation packages align interests through incentive structures. Boards design pay to retain talent and motivate performance. Executives accept these terms. Everyone benefits proportionally.
Musk inverted this entirely. He threatened on social media to leave Tesla if shareholders rejected the package. As the company's largest shareholder and primary public face, this carried weight. Shareholders faced a binary choice: approve unprecedented compensation or watch stock value collapse.
This is hostage-taking, not incentive alignment. The vote became coerced rather than deliberative. Shareholders could not rationally evaluate appropriate compensation when the executive framed rejection as triggering immediate damage.
Musk justified his increased ownership by claiming he needed sufficient stake to ensure Tesla's "robot army" didn't fall "into the wrong hands," whilst wanting ownership small enough that he "couldn't be fired if he went crazy." This rhetoric transforms questions about appropriate pay into tests of faith. Opposition becomes betrayal of Tesla's mission rather than legitimate governance concern.
Tesla Chair Robyn Denholm offered her justification before the vote, stating that "what motivates him is doing things that others can't do or haven't been able to do." This treats Musk's motivation as mysterious and personality-driven rather than economically rational. It suggests normal incentives don't apply, that his psychology requires special accommodation, that shareholders should simply trust that maximum compensation enables maximum achievement.
The evidence suggests otherwise. During the first half of 2025, whilst this package was negotiated, Musk's attention focused on government work and xAI development rather than Tesla's declining vehicle sales. If compensation motivates focus, the timing reveals its failure.
Speculation displaces accountability
The package's approval during operational challenges shows how executive pay has fully decoupled from actual performance. Current results don't matter. Future promises do, even when those promises may never materialise.
Consider the numbers. Adjusted earnings must grow from $16 billion to $400 billion. That's 2,400% growth, requiring Tesla to generate profits exceeding the world's most profitable companies today. The robotaxi milestone assumes mass adoption of autonomous technology that remains, after years of promises, perpetually "coming soon."
The humanoid robot target involves a product category that doesn't yet exist commercially. Current Optimus demonstrations show machines requiring extensive remote control for basic tasks. The gap between demonstration and commercial viability spans years, possibly decades. Yet compensation tranches assume near-term delivery.
This approach transfers enormous wealth based on projections that history suggests are overoptimistic. Musk has promised Full Self-Driving "next year" for nearly a decade. The Cybertruck, originally promised for 2021, finally entered limited production in 2023 at far higher prices. The Semi truck, announced in 2017, remains in limited production with timelines continuing to slip.
None of these missed projections mattered to the compensation vote. Shareholders approved a package worth potentially a trillion dollars based on faith rather than execution history. The board calls this "pay for performance," but performance gets measured by promises, not achievements.
The milestone structure nominally includes accountability. Musk receives roughly 1% of Tesla's shares for each tranche unlocked, vesting in 7.5 or 10 years. But these protections prove illusory. The milestones combine easily achievable targets driven by stock enthusiasm with potentially impossible targets that provide rhetorical justification whilst remaining unattainable.
More fundamentally, vesting periods mean accountability reckoning lies a decade away, far beyond market attention spans or shareholder memory. By then, entirely different management, boards, and shareholders may be involved.
Democratic dysfunction in corporate voting structures
The voting breakdown reveals how governance structures systematically advantage wealth concentration. Institutional investors managing retirement funds opposed the package. The California Public Employees' Retirement System, New York City pension systems, and Norway's sovereign wealth fund (holding 1.2% of Tesla) all voted against. These institutions employ professional analysts and operate under fiduciary duties. Their conclusion: the compensation was excessive.
Institutional Shareholder Services, which advises passive funds, explicitly urged rejection of what it termed an "astronomical" award. These aren't activists with ideological positions. They're mainstream investors whose professional judgement found the package unjustifiable.
They were outvoted. Charles Schwab, with 0.6% stake, supported the package. More significantly, retail shareholders voted overwhelmingly in favour. The 75% approval rate means individual investors, motivated by identification with Musk or belief in his vision, collectively exercised more voting power than professional fiduciaries.
This creates governance arbitrage. Voting structures theoretically aggregate preferences of shareholders bearing proportional risk. But when retail bases function like devotional communities rather than economic actors, voting mechanisms redirect toward wealth concentration benefiting the devotion's object whilst potentially harming believers' financial interests.
The dynamic resembles political cults more than markets. Followers vote to enrich the leader because opposing him feels like betrayal rather than fiduciary responsibility. Economic irrationality becomes invisible from inside the community because dissent reads as apostasy.
For pensioners whose funds voted against the package, this represents democratic deficit. Professional managers acting on their behalf concluded the compensation was excessive. Believers managing their own accounts outvoted them. Pensioners' interests got subordinated to others' faith.
The xAI investment vote compounds these concerns. Shareholders were asked to approve board investment in Musk's competing artificial intelligence company whilst simultaneously approving compensation justified partly by Tesla's AI ambitions. Substantial abstentions suggest discomfort, but not enough to prevent more votes for than against.
This entanglement creates a structure where Tesla shareholders fund a constellation of Musk-controlled enterprises with minimal accountability about resource allocation. The package's approval during obvious conflict suggests shareholders either don't perceive the problem or have abandoned expectation of arm's-length governance.
At potential maximum value, $1 trillion exceeds the annual GDP of Saudi Arabia, Switzerland, Turkey, or Taiwan. It could fund Britain's entire National Health Service for 18 months. Distributed equally, it would provide $3,000 to every American or fund every public school student for nearly a year.
These aren't rhetorical flourishes. They illuminate wealth accumulation at scales that challenge the legitimacy of private property claims based on individual contribution. Whatever value Musk has created or might create, the notion that any individual's contribution justifies wealth exceeding nations' productive output strains the meritocratic logic supposedly justifying inequality.
The package sets precedent. If shareholders approve trillion-dollar compensation at a company with operational challenges, following judicial findings of compromised governance, during distracted leadership, what constraints actually exist on executive pay? The answer: remarkably few, particularly when companies cultivate personality cults around charismatic leaders who can credibly threaten departure.
This reveals how extreme inequality isn't merely market forces or differential talent. It is actively constructed through governance structures facilitating extraction. The corporate form, theoretically designed to aggregate capital for productive enterprise, evolves into a mechanism for concentrating wealth when voting power aligns with belief systems rather than rational evaluation.
For Tesla workers during this period of declining sales, the contrast must appear stark. The company implemented workforce reductions whilst approving potentially trillion-dollar executive compensation. Operational challenges justifying workforce cuts posed no barrier to executive wealth extraction.
The broader implication extends beyond Tesla. As wealth concentration accelerates and governance structures prove incapable of constraining extraction by charismatic executives, resulting inequality delegitimises economic system claims to meritocratic fairness. When individuals accumulate wealth exceeding national GDPs through governance arbitrage and personality cults rather than proportional contribution, system defenders face increasingly difficult questions about what justifies such distributions.
What governance failure reveals
This compensation package isn't an outlier. It illuminates how contemporary corporate governance operates when personality eclipses accountability, speculation replaces performance evaluation, coercion masquerades as incentive alignment, and devotional communities override fiduciary responsibility.
The Delaware court identified governance failures. Shareholders responded by approving an even larger package under identical conditions. Institutional investors with professional analysis concluded the compensation was excessive. Retail believers outvoted them. The company experienced operational challenges and distracted leadership. Shareholders decided this was the moment to approve potentially trillion-dollar compensation.
Each contradiction reveals the same dynamic: governance structures designed for accountability have been captured by forces enabling extreme wealth extraction. Voting mechanisms, board oversight, judicial review, and professional analysis all prove inadequate when confronting personality-driven shareholder bases willing to approve whatever the charismatic leader requests.
The result is wealth concentration at scales unprecedented in corporate history, justified through milestones that may never be achieved, approved through explicitly coerced votes, during operational periods that would traditionally trigger restraint. This isn't governance. It's extraction wrapped in the rhetoric of performance incentives and shareholder democracy.
For those concerned about inequality, this case study provides clear view of the mechanisms. It isn't simply that some individuals are more talented. It's that governance structures can be captured to facilitate extraction at scales dwarfing any reasonable assessment of individual contribution.
The aristocracy of the 21st century doesn't inherit titles. It captures corporate governance.
