Tesla Shareholders Approve Musk's $1 Trillion Pay Package with 75% Support

This analysis is based on the CNBC report [1] published on November 6, 2025, regarding Tesla shareholders’ approval of Elon Musk’s $1 trillion compensation package with over 75% voting support at the company’s annual meeting in Austin, Texas.

Tesla’s stock declined significantly following the announcement, closing at $445.91 on November 6, 2025, down 3.54% (-$16.35) from the previous close [0]. The stock experienced high volatility during the session, trading between $435.09 and $467.45 with volume reaching 104.87 million shares, substantially above the average of 87.24 million shares [0]. This decline occurred during a broader market sell-off, with the S&P 500 falling 0.99% to 6,720.32, NASDAQ Composite declining 1.74% to 23,053.99, and Dow Jones dropping 0.73% to 46,912.31 [0]. Tesla’s underperformance relative to the market suggests investor concerns about the pay package’s implications despite shareholder approval.

The unprecedented pay package consists of 12 tranches of stock awards tied to increasingly ambitious milestones [1]. The market capitalization targets progress from $2 trillion (first tranche) through $500 billion increments up to $6.5 trillion, then $1 trillion increments to reach $8.5 trillion total - representing 466% growth from Tesla’s current $1.44 trillion market cap [0][1]. Operational milestones include 20 million vehicle deliveries (Tesla has delivered ~8 million to date), 10 million active Full Self-Driving subscriptions, 1 million Optimus humanoid robots delivered, 1 million robotaxis in commercial operation, and annual adjusted profit targets from $50 billion to $400 billion [1].

Tesla’s current adjusted EBITDA (Q3 2025) stands at $4.2 billion [1], requiring exponential growth to reach the $400 billion annual target. The company’s current P/E ratio of 270.99x [0] already indicates high valuation expectations, making the additional growth targets particularly challenging.

The approval follows Tesla’s strategic relocation from Delaware to Texas and implementation of shareholder-friendly bylaws that make legal challenges more difficult [3]. Under Texas law SB 29, shareholders must own at least 3% of shares (approximately $42 billion worth) to bring derivative lawsuits, a threshold only met by major institutional investors and Musk himself [3]. This strategic move demonstrates Tesla’s proactive approach to protecting the compensation package from the legal challenges that invalidated the previous 2018 plan.

Despite strong shareholder approval (75%+), the immediate negative market reaction suggests a disconnect between voting shareholders and market participants. The 3.54% stock decline on announcement day, underperforming major indices, indicates broader investor concerns about dilution potential, governance implications, and the feasibility of the extreme performance targets [0].

The plan represents a bold attempt to align Musk’s incentives with extraordinary shareholder value creation, but the targets require Tesla to achieve multiple breakthroughs simultaneously: massive market cap expansion, exponential production scaling, successful autonomous vehicle deployment, and humanoid robot commercialization. The breadth of “covered events” clauses could allow payouts even if specific targets are missed, potentially reducing accountability [1].

• Execution Risk:
  The targets require Tesla to increase market cap from $1.44 trillion to $8.5 trillion while scaling production from ~8 million to 20 million vehicles annually [0][1]
• Concentration Risk:
  Musk’s increased voting power to ~25% could reduce board oversight and shareholder influence [1][2]
• Legal Risk:
  While Texas law provides protection, the Delaware Supreme Court ruling on the previous 2018 plan could still create complications [3]
• Opportunity Cost:
  The $1 trillion potential payout represents significant capital that could be used for R&D, manufacturing, or shareholder returns

• Progress toward early milestones, particularly the $2 trillion market cap target
• Tesla’s ability to scale FSD subscriptions and robot production
• Legal challenges that may emerge despite Texas’s protective laws
• Musk’s time allocation across his various business ventures
• Institutional investor sentiment and potential proxy voting changes

Over 75% of Tesla shareholders approved the compensation package, demonstrating strong support for Musk’s leadership despite opposition from proxy advisors ISS and Glass Lewis [1][2].

The plan grants Musk up to 423 million additional shares, potentially increasing his ownership from approximately 13% to 25% and boosting his voting power to roughly 25% [1][2].

Tesla stock underperformed the market following the announcement, declining 3.54% compared to broader index declines of under 2% [0].

The approval leverages Texas’s shareholder-friendly legal framework, requiring 3% ownership ($42 billion) to initiate derivative lawsuits, significantly raising the bar for legal challenges [3].

The plan requires achieving multiple unprecedented milestones across market capitalization, vehicle production, autonomous technology, and robotics, with some targets requiring exponential growth from current levels [1].