just a few months ago a judge took away the record setting pay package Tesla gave Elon Musk saying it was an unfathomable sum of money that it violated state law and that it was unfair to shareholders but those same shareholders just voted to give musk all that money in stock options back I just want to start off by saying Hut damn I love you guys more than 70% of shareholders voted in favor of giving him this enormous pay package it’s been made clear to him that it’s his company and everyone has faith in him to keep making it his company this is a story about money yes the biggest pay package in American corporate history it’s also about power and fear let’s go through [Music] it when Elon Musk makes money it’s not like he gets suitcases with billions of dollars inside he doesn’t actually draw a salary at all from Tesla instead what shareholders agreed to six years ago was that musk would have 10 years of performance targets to hit all related to the company’s market value its Revenue its earnings and each time he’d reach one of those predetermined targets he’d get access to a bunch of stock options at a drastically reduced price in theory he could earn more than 300 million options with with this plan which adds up to about 12% of Tesla’s overall stock at their Peak those options were worth $56 billion US hundreds of times more than any boss in America made last year the big Holy Grail Target that they set for Tesla’s market value was $650 billion like make us a $650 billion company and we will reward you handsomely shareholders said and for a lot of them that really felt like shooting for the moon because it was more than 10 times what Tesla was worth back then people didn’t expect to ever have to worry about paying this kind of package to Elon in 2018 because the numbers seemed ridiculous but you know what in under three years Tesla reached that goal and it didn’t stop there to that huge milestone for Tesla the electric automaker now valued at more than $1 trillion musk has met nearly every single performance Milestone the company laid out for him now even though a majority of shareholders voted for these targets and rewards all the way back in 2018 a group of them felt the way this played out was incredibly unfair they sued they argued that for example the Tesla board of directors who pushed this deal were in a conflict of interest among them Elon musk’s personal friends his former divorce lawyer basically some felt these people were just way too close to be impartial and actually serve shareholder interests they also argued they were misled not given enough information about the pay package and how easy those targets would be to reach bottom line they thought it was wildly excessive and just a few months ago a judge agreed a judge in the US state of Delaware has annuled a 56 million dollar pay package that was awarded to Elon Musk in 2018 calling it an unfathomable sum that was unfair to shareholders adding it was negotiated by a board of directors beholden to musk but this ruling would not go unchallenged Tesla’s board asked shareholders to vote again with all of the controversy in the light of day and once again they took musk’s side give the man what he was promised because they feared if they didn’t Elon Musk and Tesla might drift farther and farther apart one big topic of conversation among Tesla shareholders these days has been how do we keep musk’s attention you know it’s funny to think back in 2018 we mainly knew Elon Musk as the CEO of Tesla Elon Musk tweeting last night that Tesla is launching a less expensive version of the model 3 but nowadays do you only think of him that way or is he the CEO of SpaceX and starlink launching astronauts and satellites into outer space is he the bombastic provocative champion of Twitter now X the so-called Town Square of the internet or maybe he’s an AI revolutionary last year he founded a new AI startup to challenge the makers of chat GPT oh and he’s basically into brain surgery now his company neuralink has been running clinical trials that’s testing on people for its brain implant that can turn thoughts into actions I think he’s kind of a workaholic to put it mildly it’s fascinating to to consider you know how much is too much you know if he’s running Twitter is that distracting him from Tesla and if he’s running SpaceX is that distracting him from from Tesla this is what you get when you rely on someone with seemingly endless ambition Tesla’s supporters say he is a Visionary they say we’re rich because of him but we have to keep his attention on us the chair of Tesla’s board put it this way one thing Elon most certainly does not have is unlimited time nor does he face any shortage of ideas and other places he can make an incredible difference in the world we want those ideas that energy and that time to be at Tesla but that requires reciprocal respect translation we get richer if Elon Musk gets richer and we can make him richer by tying his fortune to this company all of those shares that musk gets from this deal he has to hold on to for 5 years before he can cash them out and that the board argues should incentivize him to put some of his time back into Tesla to bump up its share price and let’s talk about share price it’s been on a major downward slide over the last few years at its peak price in 2021 Tesla was a$ 1.2 trillion company now it’s worth less than half that and accordingly the value of musk’s pay package has already dropped from $56 billion to 45 billion well the argument is that by giving him his money uh that he will stay focused on Tesla it means that a big part of his personal wealth is tied around Tesla he has a strong incentive Tesla to be successful the counterargument is that all this money has been counterproductive and that he’s used it in ways that have distracted him from Tesla for example by buying X which is clearly taking up a lot of his time and is a distraction I’ll say what I want to say and if if if uh the consequence of that is losing money so be it but here’s the other side to this that this isn’t just about motivating Elon Musk to work harder it’s about about motivating him not to leave Elon Musk wants more control of Tesla he had to sell a bunch of his stock to buy Twitter for 40 some billion dollars leaving him right now with just a 133% stake in his own company this package could help him get closer to 25% he’s a guy who likes control that’s obvious he he he likes to do things his own way he doesn’t like other people holding him back or telling him what to do and a lot lot of shareholders are comfortable with that they think he’s a genius but uh there’s also quite a few shareholders who are not comfortable with it because they feel most human beings do need uh guard rails uh they need to consult with other people they need to follow rules just a few months ago musk even publicly threatened to quit Tesla if he didn’t get that control saying I am uncomfortable growing Tesla to be a leader in Ai and Robotics without having around 25% voting control enough to be influential but not so much that I can’t be overturned and some Fear The Exodus has already begun in small ways a group of shareholders is suing musk alleging he’s diverting resources away from Tesla and directing them towards his new AI company so for many this vote wasn’t just about how much to pay musk to keep him engaged in his work it was about making sure he didn’t walk away entirely [Music] so what is Elon Musk Worth to Tesla for many shareholders his vision is his value Tesla investors see the company as being very intertwined with Elana it’s an extension of his personality and a reflection of his drive and his ambition it’s important to remember the waters around Tesla are choppy right now Tesla shares under pressure after the EV company narrowly missed earnings estimates and warned that its expansion will be notably lower this year Tesla is heading to trial in California today to defend a high stakes lawsuit claiming that its autopilot system caused a crash that killed its driver the EV industry in general is struggling China’s become a major player in this space and there are major concerns about whether Tesla can kick things into a higher gear Elon Musk thinks he can I think we’re uh not just open a new chapter for Tesla we’re we’re starting a new book okay one part of that new book he says is full self-driving cars specifically a fleet of fully autonomous Robo taxis something he claims is on the horizon electric car maker Tesla might be rolling out an autonomous taxi service this summer Elon Musk saying that we will get the unveil of the robo taxi on August 8th for the fleet that is owned by our customers it will be like an Airbnb thing you can add or subtract your car to the fleet whenever you want so you can say like I’m going away for a week uh at just one tap on your Tesla app your car gets added to the fleet and it just makes money for you while you’re gone then there’s the question of leaving cars aside altogether and focusing on robotics on a recent earnings call musk told investors that he expects to start using these humanoid robots he calls Optimus in Tesla factories later this year and he said they could start selling them externally by the end of 2025 the goal to Market them as companions helpers that can babysit your kids help them with homework like who doesn’t want to see 3PO you know um uh you know but a c3p plus R2-D2 plus you know Plus+ um it would be pretty awesome uh I think I think everyone in the world is going to want one it’s these kind of off-the-wall moonshot ideas that get investors excited about Tesla and that many might not trust a run-of-the-mill CEO to actually pull off he’s done enough he’s done enough unprecedented things over the past 15 plus years that people didn’t think would ever get done or get accomplished that even if he’s got a spotty track record he still got a more impressive track record than any other human in terms of busting into new areas and new things that never have been accomplished I think the people who are still invested in Elon are the Believers who have faith in his uh genius his ability to make these things happen and I think the people who are Skeptics have probably sold their shares so shareholders have had their say again approving Elon musk’s big payout but it’s not binding it’s just an argument that the company can now make to a judge to say you see you said this was unfair to sharehold holders but shareholders want this what we don’t know is whether that will be enough to sway a judge to give final approval
Money, power and fear were on full display as Tesla approved a massive $45-billion US package for CEO Elon Musk. Andrew Chang explains why most of the EV company’s shareholders believe Musk is worth the largest compensation deal in the history of corporate America — and what they say they stand to lose if it doesn’t go through.
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