The Vote

Tesla shareholders overwhelmingly approved Elon Musk's massive pay package. Results announced Thursday at the Austin annual meeting showed 75% support among voting shares.

The board recommended approval. Top proxy advisors Glass Lewis and ISS recommended voting against it.

The pay plan consists of 12 tranches of shares granted if Tesla hits certain milestones over the next decade. It would increase Musk's ownership from about 13% to 25%, adding more than 423 million shares to his holdings.

The Milestones

The first tranche pays out if Tesla hits $2 trillion market cap. Tesla's current market cap is $1.54 trillion.

The next nine tranches get awarded if Tesla's value increases by increments of $500 billion, reaching $6.5 trillion. The last two tranches require $1 trillion increases, meaning Tesla would need to hit $8.5 trillion for Musk to collect the full package.

Tesla also laid out earnings milestones beginning with $50 billion in annual adjusted profit and climbing to $400 billion. In Q3, Tesla reported adjusted EBITDA of just $4.2 billion.

Other goals include:

• 20 million vehicle deliveries (currently delivered 8+ million total)
• 10 million active FSD subscriptions
• 1 million Optimus robots delivered
• 1 million robotaxis in commercial operation

The Optimus Claims

At the meeting, Musk made bold claims about Optimus robots. He said they "will eliminate poverty," "give everyone amazing medical care," and will be "bigger than cell phones, bigger than anything."

He also claimed the robots could be used for "containment of future crime" by following criminals around and stopping them from "doing crime."

There's currently no Optimus robot on the market. Musk didn't provide target dates for reaching those goals.

The Loopholes

Reuters previously reported Musk could score tens of billions without meeting most targets, collecting over $50 billion by hitting just a handful of more attainable goals.

The award terms include "covered events" allowing Musk to earn shares without meeting operational milestones. These include natural disasters, wars, pandemics, and changes to laws or regulations that hamper the company's ability to design, manufacture or sell products.

The plan puts no limits on Musk's political activity and doesn't establish minimum time he must spend working at Tesla.

The Legal Context

Shareholders voted on this new plan after Delaware Court of Chancery ruled last year that Musk's earlier 2018 pay plan was improperly granted and must be rescinded. Musk appealed and the Delaware Supreme Court will decide the matter.

The xAI Vote

A separate proposal submitted by individual investor Stephen Hawk called for Tesla to invest in xAI, Musk's AI startup formed in March 2023 to compete with OpenAI.

Tesla general counsel Brandon Ehrhart said the company received more votes in favor than against, but noted significant abstentions. Tesla is considering next steps.

Musk's Other Commitments

Beyond Tesla, Musk runs xAI (which merged with X), leads SpaceX and Starlink, and founded Neuralink and The Boring Company.

He's also heavily engaged in politics, working to help President Trump return to the White House and leading efforts to slash federal government at the start of Trump's second term.

The National Bureau of Economic Research published a paper last month estimating Tesla sales from October 2022 through April 2025 would have been 67% to 83% higher without Musk's "polarizing and partisan actions."

The Bottom Line

Shareholders betting Tesla can hit $2 trillion market cap approved Musk's pay plan despite significant concerns. The 75% support shows investor confidence, but the milestones required are extraordinarily ambitious.

Tesla needs to nearly triple its current market cap just for Musk's first payout. Reaching $8.5 trillion would make it worth more than Apple, Microsoft, Nvidia, and Amazon combined. The operational targets are equally daunting - jumping from $4.2 billion quarterly adjusted EBITDA to $400 billion annually seems nearly impossible.

The loopholes allowing payouts without hitting milestones raise questions about whether this truly incentivizes performance. If natural disasters or regulatory changes can trigger payments, the plan looks less like pay-for-performance and more like a wealth transfer.

Proxy advisors opposing the plan highlights governance concerns, yet 75% of shareholders still approved it. That suggests investors either believe in Tesla's potential or feel they have no choice but to keep Musk happy to prevent him from leaving.