There is without a doubt no automaker CEO more linked to their auto brand than Elon Musk and Tesla. In fact, it’s hard to think of another company in which the CEO is such a prominent part of the brand. I can’t think of one. Nonetheless, for years, people have raised the question of when Elon Musk would move on from Tesla. I remember that Elon’s response several years ago was that he would probably do so once the company got truly mass market vehicles into high-volume production and the company was stable financially and would succeed on its own. If you’ve been checking the calendar, that day has come and gone.
As Tesla has matured, Musk has put more people in control of managing and scaling up car manufacturing operations. He likes to be involved in manufacturing improvements, as he noted to me in multiple DMs on Twitter back when it was called Twitter. At his heart, he’s an engineer who enjoys fixing things and he sees innovation in manufacturing as one of Tesla’s biggest competitive advantages. But it’s really the bleeding edge of technology that Elon Musk is addicted to and feels a need to be involved in. That is now relevant to a hot discussion between Elon and the Tesla board.
Musk is arguing for a new compensation package in which he can gain up to 12% more share of the company. There’s a lot to say about this which I’ll get to in a moment, but let’s first address the question of whether Elon Musk will move on from Tesla. When discussion of a new compensation package for Elon Musk was raised, he responded in the following way: “I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control. Enough to be influential, but not so much that I can’t be overturned. Unless that is the case, I would prefer to build products outside of Tesla. You don’t seem to understand that Tesla is not one startup, but a dozen. Simply look at the delta between what Tesla does and GM. As for stock ownership itself being enough motivation, Fidelity and other own similar stakes to me. Why don’t they show up for work?”
The thing is, the Tesla board is pretty much always 100% in alignment with Musk. I can’t recall a situation in the past decade in which the board voted against Musk’s wishes. So, it’s highly likely the board will approve the comp package Elon wants. He also tweeted: “I should note that the Tesla board is great. The reason for no new ‘compensation plan’ is that we are still waiting for a decision in my Delaware compensation case. The trial for that was held in 2022, but a verdict has yet to be made. I put “compensation plan” in quotes, because, from my standpoint, this is primarily about ensuring the right amount of voting influence at Tesla. If I have 25%, it means I am influential, but can be overridden if twice as many shareholders vote against me vs for me. At 15% or lower, the for/against ratio to override me makes a takeover by dubious interests too easy. I would be fine with a dual class voting structure to achieve this, but am told it is impossible to achieve post-IPO in Delaware.”
So, no, I don’t think Elon will be moving on from Tesla anytime soon. But we’ll see what happens. (Of course, one should note that a large stock compensation package like this would dilute the value of other Tesla shareholders. Perhaps that will complicate things?)
Now let’s get to some other matters. In response to that last tweet, our friend and longtime Tesla bull and superfan Eli Burton (aka Starman) had an excellent question: “You had well over 15% before selling off 35% of your shares to buy Twitter. They didn’t make you sell your shares or wrangle control form you. So serious question, why should the board do anything to rectify this for you?” A thread was started on the Tesla Owners Online forum with the question, “Elon Musk looking at distancing himself from Tesla?” The first response commented, “He’s trying to blackmail Tesla shareholders into giving him, for free, the shares he sold to buy X. Maybe he should sell X and concentrate on Tesla.”
This is the matter several others are rightfully bringing up. Musk reduced his shares in Tesla in order to buy Twitter. Now he wants more shares again so that he can have more control over the company. But does he deserve to have so many back when he gave them away so loosely not long ago? Many think he does not. Others, of course, think he’s the main driver of innovation at the company and deserves such a compensation package.
If we wanted to go one step further, we could discuss the massive debate between whether Elon Musk’s AI and robotics work at Tesla is revolutionary or a dead end. This is hotly debated constantly. There are shareholders who would bail on TSLA immediately if Elon Musk wasn’t working on this stuff from within the company. There are others who would be relieved if he took his galactic-level tinkering to another Gigagarage. Will the former continue to have the greatest influence over the compensation package and Elon Musk staying? Or will the latter take control at last and tell Elon, “So long, and thanks for all the fish?”