Inside The Fight Over Elon Musk's Trillion Dollar Pay Package

Forbes

Forbes Senior Editor Alan Ohnsman joins Forbes Talks to discuss the controversy surrounding Elon Musk’s unprecedented, trillion-dollar Tesla pay package. Ohnsman dives into the colossal scope of executive compensation that critics call unmitigated and problematic, the necessity of founder control as Musk argues for a 25% ownership stake to assure his vision, and the company’s strategic shift from a vehicle maker to a future-focused AI and robotics business.   Read the full story on Forbes: https://www.forbes.com/sites/alanohnsman/2025/10/02/teslas-sales-surge-is-a-sugar-high-powered-by-less-musk-and-trumps-ev-tax-credit-cut/  00:00 The Controversial Trillion-Dollar Pay Package Unveiled 01:45 Tesla's Justification for Keeping an "Absolutely Essential" Elon Musk 04:22 The Board’s Explicit Plea and Elon Musk's Final Onslaught 05:45 The Board's Double-Edged Sword and Concerns Over Unchecked Power 08:01 Why Institutional Investors and Advisory Firms Oppose the Package 11:13 The Reality Versus the Promise of Robotaxis and Humanoid Robots 17:35 Musk Lashes Out At Opposing Advisory Firms  Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1  Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:  https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript  Stay Connected Forbes newsletters: https://newsletters.editorial.forbes.com Forbes on Facebook: http://fb.com/forbes Forbes Video on Twitter: http://www.twitter.com/forbes Forbes Video on Instagram: http://instagram.com/forbes More From Forbes:  http://forbes.com  Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.

Transcript

00:00Hi, everybody. I'm Brittany Lewis. I'm a reporter here at Forbes. Joining me now is my colleague

00:07Alan Onsman. He's a senior editor and author of The Current Climate Newsletter. Alan, thanks so

00:13much for joining me. Hi, Brittany. Good to be with you today. Elon Musk had some fiery words

00:18for two advisory firms who advised shareholders to vote no when it came to his trillion dollar

00:24pay package. And I want to talk about the details of this pay package first, because back in September,

00:30Tesla unveiled this new compensation package for Elon Musk. It could be worth around one trillion

00:35dollars as long as the company hits some lofty goals within the next 10 years. So start off the

00:41conversation, break down what exactly is in this pay package. Yeah, it's a 10 year comp package and it

00:48replaces one that's basically expired. He hit all the initial targets that were set several years ago.

00:54So this one will be running over the next decade. And it includes about 10 or 12 tranches, I guess,

01:01of accomplishments that he has to achieve over that year. It's like Tesla getting to $8.5 trillion

01:08market cap, a million robo taxis, a million humanoid robots, 20 million cumulative EVs, a whole series of

01:17things along those lines. And so each time he hits one of these targets in the package, he would receive

01:25a really significant amount of stock. And the goal over time is that Musk's stake in the company will

01:33rise by about 12 percent and get him well over 25 percent direct ownership stake and, you know,

01:39will keep him assured that he remains the single biggest shareholder. The trillion dollar pay package

01:47is eye popping. It's mind boggling. It was controversial. It's historic. It's unprecedented.

01:53I'm curious how Tesla exactly justifies this, because you reported earlier this year things are bad at

01:59Tesla. They're probably going to get worse. Tesla had a disappointing Q1 earnings report. The profits

02:06plummeted 70 percent. In April, the company posted its worst quarterly results in four years.

02:12Q3 was a mixed bag. How do they argue keeping Elon Musk at potentially this price? How are they arguing

02:18that that benefits the company? Well, honestly, at the time when the package was announced in an SEC

02:25filing, Robin Denham, who is the chair of Tesla's board and has been for several years now,

02:30said basically, you know, keeping Elon is absolutely essential to the company's future,

02:36that they, in her view and the view of the board, no one else can run Tesla and take it into this next

02:46phase like Elon. And as you say, the total package all in based on the value of the stock is a trillion

02:53or more over time, which is there is no precedent for that. I mean, Musk is already by far the wealthiest

03:00human being on the planet with, you know, net worth approaching half a trillion dollars currently.

03:07So, you know, this package would just be, you know, again, unprecedented, as you point out.

03:13And it's because of the things that Musk is talking about now for this next phase of Tesla.

03:20Tesla shifts from being a big electric vehicle maker into a leading AI company, into a robotaxi

03:28company, into a humanoid robotics company. And on the earnings call yesterday, those were mainly

03:36the topics he spoke about throughout most of the hour long earnings call, talking about those future

03:44things. He didn't really dwell on or get into the specifics of what went wrong or didn't work out as

03:51well in Q3, but rather keeping the focus on what's coming next. And that's really what Elon does for

03:59Tesla. It's convincing people that regardless of how astronomical the company's P.E. ratio is,

04:07that's, you know, a couple hundred times, I guess, price to earnings at this point, ignore that because

04:13the future is going to be bigger and bigger and bigger. And if you believe that, you know, according

04:18to the board, he's worth whatever, you know, they can carve out for him. But this is clearly

04:24controversial. As you point out, there are investor groups and investor advisory firms that are openly

04:32saying do not vote in favor of this. This is a very problematic package. And this is what happened

04:39on the call yesterday. Earnings went through the earnings. The CFO and Elon talked through everything.

04:45Some executives spoke. It seemed that it concluded. And then suddenly there was this final bit from the

04:51CFO who said, we have one more thing. And we do really want to encourage everyone to vote in favor

04:56of this compensation package because it's very important for the future of Tesla. And that's

05:03pretty much when when Elon just unloaded. And it was interesting tonally because throughout most of

05:11the call, he was on his best behavior. He was definitely trying not to be controversial,

05:18was not saying anything. You know, he's really been sort of wild. And some of the past calls have gone

05:25off the rails. So it was more buttoned down perhaps than it's been in a long time until this final

05:32piece. And then suddenly he he really kind of unloaded on, you know, the two different advisory

05:39firms that are arguing against the compensation package. I don't know about you, Alan, but if I had

05:47a one trillion dollar payday coming my way, I would tone it down as well. But it sounds like he couldn't

05:53help himself. It sounds like the CFO really teed him up there. And he, as you said, unloaded. But

05:59before we get into what exactly he said, you did mention that board members wrote a letter to

06:04shareholders saying essentially Elon Musk is the only person for this job. This is what they wrote

06:09at the time of the pay package. We believe Elon is the only person capable of leading Tesla at this

06:14critical inflection point. And it seems like it's really a double edged sword if you're Elon Musk,

06:19so to speak, because love it or hate it. He is the brand. Elon Musk and Tesla are interchangeable

06:26essentially. But what are the concerns here when it comes to this pay package and who is concerned?

06:32Well, obviously, that's just, you know, an astronomical amount of money to give anyone.

06:38First of all, I mean, just the value is it's really hard to justify. Is any human being worth,

06:44you know, a $1 trillion pay package? You know, clearly giving him that much ownership

06:51of the company in Tesla stock is problematic. You know, Elon said, you know, over 25% is not so high

07:00that I couldn't be removed if, you know, if I was found to be completely insane, which was sort of an

07:06interesting point for him to make since questions of his, you know, mental stability have come up from

07:13time to time. But the issue, I think, is there's some concern about the board doing this in a

07:19self-serving fashion, because if they're giving, you know, fabulous stock awards to Elon, in all

07:24likelihood, they're going to be giving themselves pretty substantial stock payments as well. And it's

07:30a it's a very friendly board. And this has been one of the problems. This is why there are still

07:35lawsuits over his past pay package that remain unresolved, that the board has enriched itself while

07:42enriching Elon, and that it does not do a good job in really trying to uphold its fiduciary

07:50responsibility for making decisions that are in the best interest of the company long term.

07:56Robin Denholm believes giving Elon a trillion dollars is in the best interest of the company.

08:01Many institutional investors and the shareholder advisory firms that were referenced yesterday

08:08do not think that this is in the best interest of the company. So it's going to be interesting.

08:12I mean, I would say historically, it's a given that this will be approved by shareholders. It seems

08:19whatever the board asks for, and says we need this, Tesla shareholders uniformly reliably do say,

08:28OK, fine, they'll vote in favor of it. This is the first time we're seeing more open pushback at this

08:34stage. There have been a number of institutional investors, a lot of state pensions, the American

08:41Federation of Teachers, other groups that are saying, whoa, whoa, whoa, whoa, whoa, this is not

08:46appropriate for anyone. And this is just too much. So it's going to be interesting to see how the vote

08:52comes out. This is coming up at the annual meeting in November. So less than a month from now, this is

08:59going to be voted on. And I would also say after, you know, 15 years of listening to Tesla earnings

09:04calls, I don't think this is I've ever heard anything like what came up yesterday, where the

09:09board made an explicit plea to shareholders to support this comp package. And then Elon going on

09:17a tear, attacking, you know, those that have been critical of the comp package. That was unusual.

09:24I don't think that's happened before. Just before I get to my next question, I mean,

09:29what was the end of that conversation like if the board is saying, hey, please, please give this guy

09:35a trillion dollar pay package. He's worth it. He just unleashes calls, advisory firms, terrorists,

09:42essentially. I mean, how did it wrap up? There was a very funny line that he mentioned because he'd

09:48been talking in the call previously about his humanoid robot push, Optimus, that's coming.

09:55And I guess these will be maybe factory workers or personal slaves. I mean, I'm not sure exactly

10:00what all the applications are going to be. But he said, you know, it's crazy to think that I'm going

10:06to build this robot army and then, you know, not be able to control it, which was sort of an odd,

10:11you know, way to frame this. I guess he seemed to be saying, you know, why should I do all of these

10:19things for Tesla's future with AI and robotics if you're not going to give me enough power to

10:26maintain reasonable control of the company? I mean, it was just an odd, unnecessary thing to say,

10:31but he was clearly very worked up. And a lot of the reporting has supported this. Since the pay

10:36package came out, there was this disclosure that there were, you know, tacit threats that he would

10:42leave, that if he does not get the compensation package, he'll move on. And I know this has

10:48been reported in multiple media outlets. And I think he's even alluded to as much on X in posts

10:54there that, you know, if he doesn't get it, that maybe he'll leave. You know, I know some people

11:03would say, okay, you know, maybe it's time for a change in leadership at Tesla. Clearly, the board

11:09does not agree with that. And they want to make sure that he doesn't go anywhere.

11:13To that point, the board wants to keep Elon Musk happy. It seems a trillion dollar pay package could

11:18certainly do that, even though he's already still well beyond the richest person in the world. But

11:25in our conversations throughout this year, when it comes to Elon Musk, time and time again,

11:30we've talked about how his chaotic personal political tweets, his life have been bad for

11:36the Tesla brand. Tesla's not doing very well. He's been an absentee CEO for parts of this year.

11:43And critics are concerned that the board does not check him. The board is not independent. I mean,

11:48what do you make of that? Well, I mean, there are two different worlds happening here. There's the

11:54world that Elon tells you is unfolding. And then there's the reality. So on the call yesterday,

12:00talking about Robotaxi, for example, they just recently rolled out an upgrade to

12:07their, you know, FSD

12:11software up to this version 14 that's supposed to be a big improvement. But then they've continued to say,

12:17oh, but by the way, we have additional updates coming. So it's this kind of waiting for Godot

12:22sort of thing where the perfect version never arrives. It's always in the next update.

12:27And, you know, the software has gotten better, but it's not Waymo caliber autonomy, for example. But he

12:34keeps pushing it. And there was no discussion on the call yesterday about the current NHTSA

12:40investigation of, you know, Robotex or excuse me, full self-driving accidents that have occurred.

12:46The company is under investigation right now. Not a single question arose yesterday from investors or

12:54analysts asking how the company, you know, is responding to that. It's conversations with

13:00NHTSA investigators, which seem like kind of an oversight. So if you're an investor, you should

13:04really know that, that the company's, you know, one of its big bets on the future is autonomous driving.

13:11And yet it continues to have problems with its system, regardless of what Elon says. The reality

13:18is, again, multiple fatalities, multiple accidents and a major federal investigation is going on right

13:23now. No discussion of that on the human robotics side. You know, they keep showing sort of, you know,

13:31they did something with the new Tron movie with with the Optimus robots at the world premiere of Tron.

13:37You know, it's kind of fun and it's like a special effective sort of thing. But it remains to be

13:43seen. There is a lot of excitement generally around the future of robotics and humanoid robotics.

13:48But there's a lot of unknowns. No one is actually making any money on this right now. And we don't

13:53know if it works, if the costs, you know, justify it. I mean, maybe Amazon will buy a lot and run at

13:59warehouses with with robotic workers. But, you know, again, it's a big unknown as to, you know, how that's going

14:05to play out. So a lot of the big bets like that are just their question marks at the time being.

14:12You believe them or you don't believe them at this point, whether Tesla can accomplish them.

14:17On the raw business side, as you pointed out, third quarter, they had a great number for vehicle

14:23sales. They had a huge surge in Q3. And that's entirely because of the expiration of federal tax

14:30credits. There was an enormous rush to buy to get the cheapest possible version of a Tesla before

14:36the credits went away. At the same time, profit margin just shrank dramatically. Huge drop in profit

14:44overall. So selling more cars and making less money from them is not a good thing. Regulatory credits are

14:50gone and those are phasing out. They reported yesterday about 400 and something million dollars

14:56in regulatory credit sales. But a lot of those were likely booked earlier in the year. That whole

15:01program is basically dying because the federal government is lowering fuel economy rules. So big

15:08automakers don't need the credits as much. And it's going to block California from being able to enforce

15:14its zero emission vehicle program because there are also companies in California to comply with California

15:20rules needed to buy the credits. So one of Tesla's business lines, which is by far,

15:26its most profitable business line, credit sales, because it's a 100% profit margin. You get credits,

15:32literally, it's money for nothing. That was down to 400 million dollars. It dropped by about 30 or 40%

15:38from year over year. But that's going to, they'll probably post some more in Q4, but then that's kind

15:44of it. So that business goes away. What that means is their automotive business suddenly becomes

15:49less profitable. There was one good bright spot in the numbers. And I think this is kind of important.

15:57Their energy storage business was up dramatically. So they generated about 3.5 billion dollars

16:05in selling battery storage systems. And this is largely for utilities as well as residential

16:10installations. So that's a very good business. You know, we've talked many times about this. I'm kind of a

16:16simpleton. So I like to look at the, you know, what are the businesses that actually make money,

16:20like today? And, you know, their auto business could be a lot stronger if it was a bit more focused.

16:28And their battery business is a very good business. And we just saw yesterday, or today rather,

16:35Tesla board member J.B. Straubel, who's a co-founder, raised 350 million dollars to expand

16:41battery business for his startup, Redwood Materials, which originally started out as a battery

16:45recycler. And then they started doing battery materials. And now they're actually also building

16:51and selling large scale battery systems for, you know, utilities, data centers, things like that.

16:58So that's a really good business. And clearly that was why they attracted a lot of investment for that.

17:04So, you know, when you look at some of the things Tesla's doing, Tesla could actually be doing a lot

17:10better if it focused a little more on these core businesses that you can definitely make money on.

17:16Charging services is a good business. Selling batteries is a good business. Selling electric

17:21cars is a good business. But, you know, it seems as if he's kind of gotten bored with those things.

17:27He wants sexier, more sci-fi things. So AI, robotics, robotaxi, that's really where he's

17:35interested. Regardless of how the business is doing, Elon Musk certainly thinks he's worth

17:39this one trillion dollar pay package. However, two advisory firms do not. And this is not the

17:45first time that they've had this recommendation. Back in 2024, they advised shareholders to vote

17:50against Musk's 56 billion dollar pay package. And one of them now said that this one trillion

17:55dollar pay package, they have unmitigated concerns about its magnitude and size.

18:00So bring us to the end of this call. Elon Musk let it rip on these two advisory firms,

18:06their recommendations. What exactly did he say? He described them as corporate terrorists,

18:12which is pretty interesting because Glass Lewis and institutional shareholders service are not the

18:19most exciting companies in the world. So to dub them corporate terrorists was certainly new and original.

18:27Clearly, he's angry. He's very angry that they are telling investors not to support this. I mean,

18:35to your point, yeah, they did also take a stand on the reinstitution of Elon's pay package last year.

18:41That was the 56 billion that had been taken away because of a legal case earlier. So it had to be

18:50voted on again. They advised shareholders not to go along with it, but shareholders did. And if I'm

18:58a betting man, I assume they'll approve this one as well. But I think it's a safe bet that this one,

19:03too, is going to end up in the courts, that there will be a fight over this for shareholder groups

19:08saying that this is ridiculous. But yeah, in the call yesterday, again, he really singled out

19:14these two advisory services. But then he also said, oh, no, no, it's not really a compensation

19:20package. We shouldn't even call it a compensation package. This is really about just having this 25%

19:28plus ownership stake in the company that's for the good of the company. So, you know, it's interesting to

19:34say, like, well, forget about the fact I'm getting a trillion dollars. That's that's not important.

19:37It's it's it's the fact that, you know, this is for the good of the company that that I have this

19:42level of control. So, you know, it that's an interesting argument. Exactly. Imagine calling 100

19:48or one trillion dollars coming your way a footnote. But I'm curious why they advised against voting for

19:54this package, because Tesla's performance has been described as negative and highly volatile.

20:00We talked about how they performed in Q1, Q2, Q3. I mean, nothing was really amazing for the company.

20:06As we said, Q3 was a mixed bag. But still, did that play a role in the pushback here?

20:13Yeah, to some extent. Right. The volatility of the company at this point and also just the the sheer

20:20amount, the value of it is just so off the charts that it's really hard in good conscience to to say,

20:29yeah, this this makes sense. I mean, it is a trillion dollars. No one's ever been worth a

20:34trillion dollars. There's no precedent for this. You know, John D. Rockefeller, the first billionaire,

20:40you know, over a century ago that that was unprecedented at the time. But this is this is a

20:46magnitude of order greater at this point. So, yeah, I think their concerns are the obvious ones that it

20:53just sets a very bad example. And also because if Tesla does it, then you you may see other companies

20:59just, you know, CEOs that are really pushing for ever greater enrichment. And that's already an issue

21:04with, you know, executive compensation is is one of those topics that never goes out of style.

21:08Like, are they overpaid or not? And already, you know, Elon's been very, very well compensated.

21:15You know, he doesn't draw a salary, but when he's paid in stock, it's it's it's a remarkable

21:21amount of money. And again, a trillion dollars. There's there's just no there's no precedent for

21:26that. Well, Alan, per usual, I appreciate your updates here, your reporting. Thanks so much for

21:32the conversation. Good to be with you.

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