The Tesla Ethicist: Ought to Tesla Shareholders Insurgent Towards Musk’s Pay Increase?

Final Up to date on: fifth August 2025, 04:37 pm

Expensive Tesla Ethicist: As a longtime Tesla shareholder, I’ve been following the continued and infrequently tense discussions concerning CEO Elon Musk’s pay. His earlier compensation bundle was struck down final yr, because the court docket dominated that shareholders had not been correctly knowledgeable of its particulars. As if that wasn’t sufficient, the Chancellor additionally decided that members of Tesla’s board weren’t sufficiently impartial.

Now this week it’s been introduced that Tesla has granted shares to Elon Musk value almost $30 billion. Sometimes, government pay is tied to efficiency objectives, however I don’t see any particular language that requires Musk to do a lot of something besides keep a number one place within the firm. The present firm decline in each automobile gross sales and inventory valuation has me apprehensive. Ought to shareholders like me struggle again forward of Tesla’s annual assembly in November, the place there can be a vote on a longer-term compensation plan for Musk? I’m not in favor of accelerating Musk’s pay any additional than the latest award, that’s for certain.

Signed, A involved Tesla shareholder

Expensive involved Tesla shareholder: Your apprehension is legitimate. With the brand new shares, Musk will personal almost 16% of Tesla, or the equal of $150 billion, based mostly on Tesla inventory worth on Monday. Musk is already the world’s richest particular person, with an actual time web value of $398 billion. Rumors this spring that Tesla board members had contacted company recruiters to discover a successor to Musk haven’t panned out. As a substitute, the Tesla board has authorized a grant of 96 million shares for its CEO, which Musk may money in after two years of service in a senior management position.

“Whereas we acknowledge Elon’s enterprise ventures, pursuits, and different potential calls for on his time and a spotlight are in depth and wide-ranging,” Tesla chair Robyn Denholm and board director Kathleen Wilson-Thompson wrote in an SEC submitting, “we’re assured that this award will incentivize Elon to stay at Tesla.” Denholm has earned a revenue of greater than $500 million from Tesla inventory choices, which she has referred to as “life altering.”

This “good religion” award follows Musk’s public issues over probably dropping control of Tesla because of the affect of activist shareholders. Former US Labor Secretary Robert Reich says Musk’s assertion is simply an excuse and fails to ask why shareholders would need Musk eliminated “if he have been doing such an excellent job at Tesla. The reply is he’s clearly not doing an excellent job, and he is aware of it.”

Brad Lander, the New York Metropolis comptroller who oversees pension funds that personal Tesla shares, appears to agree with Reich. Lander described Musk’s new compensation plan to the New York Instances as “obscene,” particularly when making an allowance for that the CEO has been “largely absent” from finishing up his firm duties. “Tesla’s captive board is as soon as once more enriching Elon Musk at buyers’ expense.”

As a result of capability to entry information 24/7, customers care greater than ever about CEO pay. Perceptions of CEO pay equity are strongly linked to company governance accountability and subsequent model ramifications. Many shareholders really feel that CEO pay is insufficiently tied to agency efficiency. Others take a look at excessive CEO compensation and see a failure to dedicate assets towards objectives like bettering the standard of services. Excessive CEO pay, on this regard, is extra self-serving than value-based, and it’s the form of firm focus that may erode belief within the model and negatively influence shareholders’ need to speculate with the agency.

As with all firm, Tesla’s CEO’s is in a pivotal place to drive technique and monetary progress. This position is especially necessary in periods of uncertainty and transition. CEO pay is a visual marker of belief that an organization is working in the very best pursuits of customers, because it represents an necessary component of how boards allocate beneficial assets. But, based on a examine by Williams School, the variety of liberal voters who’ve expressed curiosity in proudly owning an EV has plummeted into unfavorable figures since Musk started his right-wing political allegiance, and conservatives have did not embrace EVs on the whole.

Tesla gross sales and income are falling, and the fault largely lies with Musk’s personal private life choices and controversial political actions. Because of this, critics allege that Musk is overpaid in comparison with his peer CEOs. For instance, Microsoft’s Satya Nadella and Google’s Sundar Pichai have led their firms to share worth progress with out such monumental pay packages. However it’s not simply Tesla: CEOs are getting paid extra due to their leverage over company boards — not due to their expertise or contributions they make to their corporations, based on the Financial Coverage Institute.

The choice by Tesla’s board of administrators to offer Musk such a uncommon pay elevate invokes a troubling subtext. As a substitute of specializing in Tesla’s electrical autos, which revolutionized the automotive trade, the Denholm-led board has sanctioned Musk’s need to redirect Tesla to Full Self Driving (FSD) robotaxis and synthetic intelligence (AI). AI algorithms can course of huge quantities of knowledge in actual time, permitting autonomous autos to navigate roads and react to dynamic situations. But Tesla’s FSD system has by no means reached its promised potential, as an alternative sputtering in stops and begins over time.

That is partially on account of its “imaginative and prescient solely” self-driving system, which has seen many enhancements but additionally has failed when confronted with on-the-edge situations. Customers haven’t seen any quantitative enchancment in FSD efficiency of late. Tesla’s autonomous driving efforts additionally suffered this week when a Florida jury discovered the corporate partially at fault for a 2019 crash that killed a 22-year-old girl and severely injured her boyfriend.

FSD and AI haven’t produced revenue for the corporate but, and income drive shareholder worth. Then once more, one other of Musk’s firms, SpaceX, has rockets that the US has come to depend on to propel astronauts and satellites into house. Simply final week Area X delivered 4 astronauts to the Worldwide Area Station in 15 hours after launch. Is his exceptionalism sufficient in order that shareholders ought to wait till the Musk pendulum of curiosity swings again to Tesla?

As a Tesla shareholder, you may have each proper to talk out and advocate for Musk’s pay bundle to be affordable and in step with firm success. Maybe it’s best to take into account different paths to CEO reform as effectively. You is usually a voice for insurance policies that restrict CEOs’ capability to collude with company boards. Maybe this implies reinstating larger US revenue tax charges for the 1%, leveraging shareholder votes on CEO compensation to hold extra weight, or insisting that antitrust enforcement and regulation bear down on the biggest corporations extra tightly.

No matter route you select, be able to take a stand that some will discover offensive, as charismatic leaders like Musk carry a substantial amount of cult-like weight.

Featured picture: “Elon Musk Presenting Tesla’s Absolutely Autonomous Future” by jurvetson, licensed below CC BY 2.0.