Elon Musk secured shareholder approval for a new stock-based package designed to double his voting power at Tesla, potentially making him the first trillion-dollar employee. As this plan cements Musk’s control it ties vesting to audacious market-cap and production targets and diverts focus from progressive value creation. Musk’s governance, layoffs, and politicization could imperil Tesla’s EV leadership and ambitions in AI and robotics.
Elon Musk is, once again, taking stock
On November 6, 2025, holders of Tesla shares, or the fund managers who wield their proxy votes, gave CEO Elon Musk what he wanted. With 75% of the votes of shareholders, Musk secured the shareholder approval for yet another record-shattering stock-based “compensation” package. The purpose of the package is not to increase Musk’s pay–although it may make him, as Tesla CEO, the world’s first $1-trillion employee. Rather its purpose is to goose Musk’s voting power at Tesla from about 13% to 25%. For Musk, the key issue is that he owns enough shares, and hence votes, to ensure that nobody can oust him as Tesla’s CEO. The extraordinary “pay” that Musk may receive is a consequence of the number of shares that he claims that he needs to secure his control.
The approval of the new pay package could put a temporary end to Musk’s paranoia over the retention of his strategic control, which gives him the power to allocate Tesla’s resources. This issue became a crisis for Musk in January 2024, when, in Tornetta v. Musk, the Delaware Court of Chancery (which had jurisdiction over Tesla) rescinded his 2018 stock-based compensation package. It would have given Musk 12% of Tesla’s shares, increasing his total voting power to 25%. In June 2024, in defiance of Delaware, Musk and his board of directors convinced Tesla shareholders to reapprove the 2018 package, which they did with 72% of the shares in favor. In December 2024, however, the Delaware Court ruled that the June 2024 vote was legally defective, rendering it null and void. In October 2025, Tesla once again appealed the Court’s decision, which is still pending.
There was, however, another Tesla shareholder vote in June 2024, designed to evade Delaware’s jurisdiction over Tesla’s future activities and decisions. Shareholders approved Musk’s plan to reincorporate in Texas, which is the jurisdiction for the votes taken at the 2025 annual shareholders meeting. Cementing Musk’s strategic control, the new 2025 compensation package, which consists of restricted stock awards, is potentially even more beneficial than the 2018 package. But the shares will only vest if, over the next decade, Tesla’s employees—who numbered 125,665 at the end of 2024—commit their skills and efforts to achieving ambitious production and sales levels. In addition, vesting of the shares depends on boosting Tesla’s market capitalization to $8.5 trillion—which, today at least, is a level of market capitalization that no publicly listed company has yet achieved.
If Musk’s employees put in the hard and smart work to generate the revenues to hit the production/sales targets, and if stock traders bid up the price of Tesla shares sufficiently, Musk will be powered up with 423.7 million additional Tesla shares, equal to 12% of the company’s shares currently outstanding. Of 12 tranches of 35.3 million shares each, vesting of the last two require Musk to put a CEO succession plan in place. Should the target market capitalization of $8.5 trillion actually be attained, the vested shares under this plan (assuming no dilution) would be valued at $1.02 trillion. By the way (for those who mistakenly report Musk’s pay as the value of the options and/or awards on the date that they are granted), the grant-date value of the shares in the new package is $87.75 billion—38 times the grant-date value of his 2018 option package, which in itself was an unprecedented value of grant-date pay in corporate history.
The prospective shares in the new package come on top of a 208-million “special share reserve” from which Tesla’s board can grant Musk a portion of the shares lost as a result of Tornetta v. Musk (should the court reject Tesla’s latest appeal), and a grant of 96 million shares as “restricted stock awards” that the Tesla board already gave Musk as a retention incentive last August, on the condition that he remains at Tesla for two years and the Tornetta decision is not overturned within that period. The awards vest and can be purchased for $23.34 per share, a price equal to the exercise price of stock options in his 2018 grant.
Each of these power grabs would deliver 9% of Tesla’s shares outstanding to Musk, and with the shares from his 2025 package included, would, assuming no dilution, lever up his voting power from its current level of 13% to about 37%—exceeding the level of control Musk had in 2011, before decades of dilution and Musk’s own choices substantially reduced it. If Tesla’s market capitalization, which is currently at a lofty $1.5 trillion, rockets to $8.5 trillion, the shares that Musk would receive from all the new Tesla shares that his board—on which he himself is dominant—is bestowing on him will be worth, again assuming no dilution, about $2 trillion.
Stock as a source of corporate power
More than just making him absurdly wealthy, Musk knows that his Tesla shareholding is the source of his corporate power. His prime objective is to maintain his strategic control of Tesla. Musk is terrified that Tesla’s institutional shareholders, who own two-thirds of Tesla’s shares, may cast their votes for directors nominated by a shareholder activist. The re-aligned board of directors could then fire Musk. In three different years over the short course of Tesla’s history, the board of directors, which Musk himself chaired until 2018, granted him stock-option packages that, when fully vested, gave him additional voting power of, respectively in 2009, 2012, and 2018, 8%, 5%, and 12% of Tesla’s shares. Musk stated in January 2024 that he needs to hold at least 25% of Tesla’s voting power to feel secure, declaring that “at 15% or lower, the for/against ratio to override me makes a takeover by dubious interests too easy.”
The “dubious interests” are hedge-fund activists—corporate predators such as Carl Icahn, Nelson Peltz, Paul Singer, Daniel Loeb, David Einhorn and William Ackman. By lining up the proxy votes of institutional shareholders such as pension funds and mutual funds, often following the voting recommendations of the main proxy advisory services, ISS and Glass Lewis, the hedge-fund activists can potentially win a proxy vote, and then, to use the well-worn American vernacular, throw the CEO bum out. As Musk complained in a recent earnings call:
I just don’t feel comfortable building a robot army here, and then, you know, being ousted because of some asinine recommendations from ISS and Glass Lewis, who have no freaking clue. I mean, those guys are corporate terrorists. And the problem—so let me explain the core problem here, is that so many of the index funds, the passive funds, vote along the lines of whatever Glass Lewis and ISS recommend.
Perhaps because Musk does not want to attack other billionaires, he fails to recognize that it is hedge-fund activists who are making use of the proxy advisory services—ISS and Glass Lewis, who together dominate this market—to mobilize the votes of institutional shareholders to engage in predatory value extraction at a company such as Tesla. How did hedge-fund activists acquire this power of predatory value extraction? In 1988, the US Department of Labor (DOL) issued what has become known as the “Avon letter,” which deemed it a fiduciary obligation for pension funds to vote the shares in their asset portfolios. In 2003, a ruling by the SEC extended this fiduciary obligation to mutual funds—in effect, ratifying the DOL’s Avon letter position—thus making it much easier for a hedge-fund activist with only a small percentage of a company’s shares outstanding to line up a large block of proxy votes for board elections and thus pose a credible threat to incumbent management’s strategic control. In mobilizing the proxy votes, the activists can lobby ISS and Glass Lewis, which, in the wake of the 2003 SEC ruling, emerged to dominate this specialized segment, to recommend to institutional shareholders a slate of value-extracting candidates for election to the corporate board.
The National Securities Markets Improvement Act of 1996 augmented the regulatory power of the federal government, and especially the SEC, vis-à-vis the states in amending the Investment Company Act and Investment Advisers Act, both of 1940, opening the door for hedge funds and private equity funds to gain access to the vast financial portfolios of institutional shareholders. As a result, assets under management of hedge funds (along with private-equity funds) soared from the late 1990s, giving them ample financial power to target companies for activist campaigns and engage in predatory value extraction, while giving fund managers of pensions and university endowments, among others, greater interest in participating in activist campaigns in their quest for higher yields on their financial portfolios.
As we have shown in detail in an article on Tesla published in September 2024, it was Musk who made himself vulnerable to a proxy attack when, in 2021 and 2022, he sold shares equal to 3.5% Tesla’s shares outstanding to acquire Twitter, no doubt believing that his 2018 stock-option package was secure. But, as we described above, the Delaware court twice–as it may a third time–rescinded it, depriving Musk of the 12% of Tesla’s shares that he thought were his.
Can Tesla become a $8.5-trillion company?
Looking back from the perspective of 2025, there is no doubt that, as an investor, entrepreneur, and CEO, Elon Musk led the transformation of Tesla from an uncertain startup into a world-leading electric vehicle (EV) company. He accomplished this feat, moreover, while also performing similar functions at SpaceX beginning in 2002, two years before he joined Tesla as investor and chairman. That having been said, the success of Tesla depended on the supply of skills and efforts of tens of thousands of employees, including a relatively small number of key people who had trust in and were trusted by Musk, to engage in the collective and cumulative learning required to develop a series of high-quality EVs and then produce those cars at scale.
In exercising strategic control at Tesla, Musk’s main functions were to support the development and utilization of these organizational capabilities as well as to protect them from corporate predators who might seek to extract value from Tesla for their own personal gain, at the expense of its continuous development as an innovative car company. The problem of predatory value extraction, which potentially faces any company that seeks to retain its revenues and profits and reinvest in innovative capabilities, can arise from inside or outside the company, or both. From inside the company, the predator can be incumbent senior management if it seeks to run the company for their own personal gain rather than for the sake of generating high-quality, low-cost products. From outside, the predator can be people who use access to voting power to usurp strategic control. As we indicated earlier, since the 1980s these external predators, known as hedge-fund activists, have become more powerful and, potentially, more antithetical to investing in innovation. Even their threat of seizing strategic control of a company can cause incumbent management to engage in activities such as downsizing the labor force and distributing corporate cash to shareholders as stock buybacks. This downsize-and-distribute resource-allocation regime is detrimental to investing in the productive capabilities of the firm.
As we have seen, Musk himself states that he needs beneficial ownership of at least 25% of Tesla’s shares to secure his strategic control over the EV company. Under normal business circumstances, the proportion of shares that Musk holds is reduced by stock-based compensation given to a broad base of Tesla employees, issued for the purpose of attracting, retaining, motivating, and rewarding them. Whenever Tesla employees sell their shares acquired via their stock-based pay into the stock exchange, Musk loses a little more proportional voting power. Once or twice a decade, he has returned to the board, demanding (and getting) more shares. As Tesla’s stock market valuation has risen, so has the value of each of Musk’s successive stock-based packages.
Meanwhile, however, Tesla employees, upon whose labor Tesla’s productive performance relies, live in fear of how their erratic CEO will wield his executive might. Over the course of 2024, he laid off, net, 14,808 Tesla employees, equal to 10.5% of the people on the payroll at the end of 2023. That was, for Musk, a warmup for the mass firings that he delighted in as the anointed head of the US Department of Government Efficiency (DOGE)—a position he got by shelling out $288 million to help his (now erstwhile) power-grab-bro Trump buy a second occupancy of the White House. We assume that the anxiety of members of Tesla’s labor force was not lessened when Musk, as head of DOGE, displayed his agility in waving a massive chainsaw overhead as a symbol of his power to slash government employment, although he would have been even more intimidating if he had delivered a version of his Nazi salute with that weapon in hand.
Musk’s acceptance of the role of special advisor to Trump drove Tesla’s stock price to a record high, even as the Delaware court’s rescission of his 2018 pay package drove his shareholding to a record low. Tesla’s EV sales, however, began stagnating in 2023, and are now likely to fall in 2025—in part because of Trump’s anti-clean energy policies, endorsed by Musk, and in part because Musk alienated Tesla’s actual and potential customer base in the United States by backing Trump for president and then putting his own megalomania on public display as DOGE’s bully-in-chief. Musk showed himself to be a tyrannical arbiter of the services that our government performs for us and the numbers of people that our state agencies need to employ to provide us with social programs, physical infrastructure, and a livable environment. As the head of DOGE, Musk wielded his power to eviscerate USAID, appropriate data from the government’s IT systems, and precipitate the termination of 300,000 federal employees—even as he completely failed to produce more than a fraction of the $2 trillion in savings for taxpayers that he had promised.
Musk’s falling-out with the Trump administration occurred as the “big beautiful bill” made permanent some gifts to the rich featured in the Tax Cuts and Jobs Act of 2017. While benefitting billionaires like Musk the most, the 2017 Act also increased the US deficit by $1-$2 trillion—that is, around the same amount that Musk claimed that DOGE’s obliteration of government employment would save US taxpayers and as much as just one citizen named Musk, who would prefer not to pay any taxes, could receive from his 2025 pay package.
Musk’s antic-filled sojourn as Trump’s advisor severely damaged Tesla’s brand, resulting in an estimated loss of Tesla’s unit sales of up to 1.26 million in the United States, in addition to declining sales in Europe. As a ruthless downsizer, Musk had previously sharpened his cost-cutting blades for his reign of terror at Twitter after his $44-billion purchase of the social-media company. As a prelude to renaming the company X, Musk slashed the Twitter labor force by 80%. Then, by pushing X’s content to the alt-right, he rendered himself toxic to many of Tesla’s existing and potential customers.
While, throughout 2023, Musk focused on his megalomaniacal transformation of Twitter, Tesla’s sales and net income declined. In Q1 2024, EV unit sales were down 20% from the previous quarter, and revenues were down 13% from Q1 2023. Musk’s response to the bad news was to announce a mass layoff of 20% of Tesla’s workforce—equal to the percentage of quarterly unit sales decline.
No employee was safe. When Tesla’s senior director of its highly successful Supercharger team tried to protect her employees from Musk’s epicaricacy, he responded by firing the entire group, putting them, as well as those in the process of setting up and hosting Supercharger stations, in total limbo. With this devastation in progress, in a presidential campaign event with Donald Trump on X on August 12, 2024, Musk seemed to take pleasure in having the former president of the United States refer to him as the “greatest cutter,” for his willingness to engage in mass layoffs at Twitter and Tesla without any concern not only for committed employees who lost their jobs but also for the abilities and incentives of remaining employees to continue to supply their productive capabilities to achieve the company’s goals.
From our perspective, setting any market capitalization goal for Tesla, never mind $8.5 trillion, puts the value-extracting cart ahead of the value-creating horse. Musk should be getting paid, along with everybody else in the organization, for their contributions to building and sustaining an innovative company that can remain a leader in global EV markets and its growing energy storage business. Up until 2024, Tesla was a world leader in “pure” EVs, but it has been surpassed by China’s BYD. First and foremost, Tesla needs to refocus on investing in innovation as a company making EVs.
The innovative response includes the integration of AI and robotics into the development and utilization of Tesla cars, including autonomous vehicles, using state-of-the-art production technologies. The current challenge that faces Tesla is that it is losing its competitive advantage in global markets, in part because of how Musk has been abusing his position of strategic control. While integrating AI and robotics into the development of state-of-the-art EVs, Tesla should also be investing in its capabilities to develop innovative batteries—at the core of EV technological progress. Then, through reestablishing and enhancing its position as a global leader in EVs, Tesla may eventually develop unique capabilities in AI and robotics that could enable it to generate innovative products such as AI chatbots and humanoid robots as distinct lines of business.
Musk and his board as predatory value extractors
In tying Musk’s pay package to becoming dominant in AI and robotics, Musk and his board are putting themselves in direct competition with other tech companies that are investing hundreds of billions of dollars in these technologies. Some of the newer companies may fail to innovate, even though, given the speculative boom, their venture capitalists, founders, and top executives become extremely wealthy in the process. Tesla itself has no chance of succeeding as an innovator in this competition if the main objective of Musk and his sycophantic directors is to make themselves as wealthy as possible by grabbing as many Tesla shares as they dare.
Nevertheless, on November 6, the shareholders’ votes were tallied, and along with his 208 million “special share reserve,” Musk’s stock-based compensation should enable him to secure his strategic control for the foreseeable future. Musk remains CEO of a company that was once both a pioneer and leader in the global EV transition. Should we expect that Musk still has an ability and incentive to lead Tesla as an innovative, and socially responsible, company over the next decade?
On this question, we can look at the claims made by Robyn Denholm, chairperson of the Tesla board of directors, in her letter to shareholders, dated October 27, 2025, urging them to vote for Musk’s new pay package. We should point out that it is to Musk that Denholm owes her tenure, since 2014, on the Tesla board. She was named chair in 2019 when Musk was forced by the Securities and Exchange Commission to step down, after he roiled the stock market by tweeting that he had lined up financing to take Tesla private, for an arbitrarily determined $420 per share. Denholm’s directorship at Tesla gave her, in her own words, “life changing wealth.” Since joining the Tesla board Denholm has realized stock-based compensation worth $534.6 million.
Denholm claims that Musk’s $1-trillion compensation package is needed to retain Musk as the CEO. She does not contend that Musk demands that amount of pay to incentivize him to stay with the company. Rather, she recognizes, as Musk himself has said, that he wants sufficient voting power to ensure that, confronted by “dubious interests,” he can retain strategic control. As Denholm rationalizes the size of the stock-award package: “We’ve done this by challenging Elon with the potential to secure what he values most—meaningful voting influence—conditioned on his commitment to continue leading Tesla for at least another 7.5 years while successfully driving our company to ambitious new heights.” She claims that Tesla needs Musk to become “a leader in AI.”
“Without Elon,” Denholm goes on (with our emphasis in italics):
Tesla could lose significant value, as our company may no longer be valued for what we aim to become: a transformative force reimagining the fundamental building blocks of mobility, energy and labor, with products such as FSD and Optimus, and working to better humanity in the process. While there may be nothing wrong with being just another car company, our Board believes that Tesla can be more, that our shareholders deserve more, and that Elon is the right leader to help us achieve our full potential.”
Nothing wrong with being just another car company? Obviously, Denholm was in part threatening Tesla shareholders with the prospect that the total value of their shares, should Elon quit as CEO, would collapse to a “paltry” GM-like $60 billion, from $1.5 trillion. But as we have documented in detail, from 2004 to 2021, Musk’s most important achievement was leading Tesla to become the world’s leading EV producer—a major accomplishment that probably served to speed up the global EV transition by at least a half decade, especially when in 2019 Tesla became the first wholly owned foreign car company to mass produce in China.
Tesla’s innovative achievements precipitated a major run-up in its stock price that saw it hit a $1 trillion stock-market valuation, as, from 2020, Tesla became consistently profitable for the first time. Musk’s 2018 stock-option package vested over the following six years, as Tesla checked off share tranches based upon achieving a combination of one market-capitalization plus one revenue or adjusted-EBITDA target. Since his purchase of Twitter, however, Musk has become increasingly erratic, and at times even unhinged, doing immense damage to Tesla’s reputation in bankrolling Trump’s presidential campaign and running amok in DC as the head of DOGE.
Meanwhile, back at the car factories, Musk must own a colossal mistake called the Cybertruck, which has had poor sales. The company also continues to outsource most of its battery production to Panasonic and CATL—the critical technology differentiating the best EV makers from those that are “just another car company.” As we argue above, Tesla does not have any inherent competitive advantages in robotics and AI unless those advantages build on Tesla being the world’s leading EV manufacturer.
In Tesla’s major businesses—EVs and battery storage—scale is critical to profitability, while retained profits are the committed source of finance for its innovation strategy going forward. In Musk’s most recent earnings call, he stated as much by sheepishly noting that, because “Tesla’s scale” was key to the success of its robot business, startup models will not work at this stage of Tesla’s development as a major mass producer. For example, greater scale permits the company to accumulate more Tesla driving mileage that feeds “real world” data into its “full self-driving” AI technology. Insofar as Tesla fails to break out of its sales slump by offering innovative, more affordable EVs, it forgoes the additional scale it once targeted and the foundations for accumulating learning advantages in AI and robotics as inputs into the development of its more advanced EVs.
Notwithstanding Musk’s promises, Tesla has failed to become a serious competitor in autonomous vehicles. Given intensive competition in developing and utilizing AI, there is no evidence that Tesla is becoming a global leader in AI as a standalone technology or as integrated into Tesla’s cars. As for robotics, world leadership resides abroad, especially in Asia and Europe; even with the growth of Tesla car manufacturing, there is no reason to believe that Tesla will become a major force in robotics as a line of business any time soon. And because of Musk’s self-inflicted reputation as an enemy of the working person and at least half of the voting public, we can expect that, going forward, Tesla will struggle to attract and retain the most qualified and most committed employees—who are the real value creators in any innovative company.
If we had a block of Tesla shares (which we don’t), we would want the board to find someone else, who would also then get rid of the existing board and form a new one. If we worked for Tesla (which we don’t), we would much prefer to work for someone who doesn’t view us as disposable, and who respects and rewards the work that we do. And as US citizens (which we are), we strongly prefer business leaders who have the abilities and incentives to engage in what we call progressive value creation: running the company with the intent of generating higher-quality, lower cost cars for consumers while making it an expressed goal to share the profits thus produced equitably with the employees whose work, day in and day out, creates value as well as with households as taxpayers who, through government agencies, fund the knowledge and infrastructure that an innovative company such as Tesla needs.
Especially since 2018, Musk and his board have increasingly shown themselves to be the antithesis of progressive value creators. As they seek to enhance their wealth and power by grabbing more and more Tesla shares for themselves, they have shown themselves to be predatory value extractors—diminishing the roles of Tesla and the United States in the EV transition.
