Palo Alto, California – October 28, 2025 – In a dramatic escalation ahead of Tesla's pivotal annual shareholder meeting, Board Chair Robyn Denholm has issued a dire caution to investors: Elon Musk could step down as CEO if his unprecedented $1 trillion compensation package is not approved. The appeal, detailed in a two-page letter sent to shareholders on Monday, October 27, frames the November 6 vote as a "critical inflection point" for the electric vehicle giant, potentially determining its trajectory in artificial intelligence, autonomous driving, and robotics.
Denholm's letter arrives amid mounting opposition from influential proxy advisory firms, including Glass Lewis and Institutional Shareholder Services (ISS), which have both recommended that shareholders reject the massive pay plan. These firms, whose guidance often sways large institutional investors holding significant Tesla stakes, argue that the package—structured as up to 423 million additional stock options—poses excessive dilution risks and grants Musk disproportionate control without commensurate performance safeguards. The proposal, unveiled in a regulatory filing last month, ties Musk's rewards to 12 tranches of options linked to audacious milestones, such as achieving an $8.5 trillion market capitalization, deploying millions of autonomous vehicles, and scaling production of the Optimus humanoid robot to billions of units annually.
"Without Elon, Tesla could lose significant value, as our company may no longer be valued for what we aim to become: a transformative force reimagining the fundamental building blocks of mobility, energy, and labor," Denholm wrote, underscoring Musk's "time, talent, and vision" as indispensable to these ambitions. She posed a blunt question to investors: "Do you want to retain Elon as Tesla’s CEO and motivate him to drive Tesla to become the leading provider of autonomous solutions and the most valuable company in the world?" The package is explicitly designed to secure Musk's leadership for at least another seven and a half years, aligning his incentives with long-term shareholder growth while addressing his repeated calls for greater voting influence—potentially boosting his ownership from about 13% to nearly 29% upon full vesting.
This is not the first time Tesla's board has navigated controversy over Musk's compensation. The current proposal stems from a protracted legal saga that began with Musk's 2018 pay deal, initially valued at $56 billion but ballooning to over $120 billion amid Tesla's stock surge. In January 2024, Delaware's Court of Chancery struck it down, ruling that the board—under Denholm's chairmanship since 2018—lacked independence from Musk and failed to provide shareholders with adequate information during the original approval. Shareholders ratified the package again in June 2024, but the decision was appealed, leading to oral arguments before the Delaware Supreme Court on October 15, 2025. There, Tesla's attorneys contended that the ratifying vote cured prior procedural flaws, a position some justices appeared receptive to, though a final ruling could take months. Critics, including the plaintiff in the original suit, a small Tesla shareholder, argued that the board's close ties to Musk invalidated the process, highlighting broader governance concerns that have dogged Tesla for years.
Governance watchdogs have long questioned the independence of Tesla's board, pointing to personal and financial entanglements with Musk. Denholm, an Australian telecom veteran, has been a vocal defender, but her letter also urges re-election of three directors—James Murdoch, Ira Ehrenpreis, and Kathleen Wilson-Thompson—who have served alongside Musk since the 2018 package's inception. Proxy advisors echoed these doubts in their recent reports. Glass Lewis, in an October 20 analysis, described the new plan as "unprecedented" and 33.5 times larger than its predecessor, warning of "significant shareholder concern" over dilution and the lack of meaningful changes from the voided deal. ISS similarly advised a "no" vote, citing the package's scale and potential to entrench Musk's influence amid Tesla's pivot from traditional automaking to AI-driven ventures.
Musk himself has amplified the stakes, lashing out at the advisors during Tesla's October 23 earnings call. "Those guys are corporate terrorists," he fumed, accusing ISS and Glass Lewis of being "disconnected from financial reality" and overly influential with passive funds. He argued that their past opposition to the 2018 package would have cost shareholders dearly, given Tesla's market cap explosion from $50 billion in 2018 to over $1.4 trillion today. Tesla's official X post reinforced this, urging investors to "take back your vote from proxy advisors" and prioritize "extraordinary financial value." In a CNBC interview on Monday, Denholm clarified that Musk's push is "less about compensation and more about the voting influence" needed to safeguard AI initiatives like Full Self-Driving (FSD) software and the Optimus robot, which he has vowed not to pursue without adequate control.
Despite the boardroom turbulence, Tesla's financials provide a counter-narrative of resilience. The company's third-quarter earnings, released last week, showed record revenue of $25.7 billion, up 8% year-over-year, driven by surging demand for Cybertruck deliveries and energy storage products like the Megapack. Automotive margins held steady at 18.4%, bolstered by cost-cutting in battery production and regulatory credits. Musk touted progress on FSD version 13, which promises unsupervised autonomy by 2026, and Optimus prototypes demonstrating household tasks in factory trials. Analysts like Wedbush's Dan Ives hailed this as Tesla entering its "golden AI chapter," projecting the robotics arm alone could add $1 trillion to valuation by 2030.
Market reaction has been buoyant, underscoring investor faith in Musk's vision. Tesla shares (TSLA) surged 5.51% on October 27, closing at $457.62—a gain of $23.90—pushing the company's market cap above $1.45 trillion. This uptick, the largest single-day advance in weeks, followed positive analyst upgrades, including Cantor Fitzgerald raising its price target to $510 from $355, citing Tesla's edge in AI hardware. Year-to-date, TSLA is up 45%, outpacing the S&P 500's 22% gain, fueled by optimism around U.S.-China trade thaw easing supply chain woes and the impending expiration of federal EV tax credits spurring Q4 sales.
Yet, the vote's outcome remains uncertain. Retail investors, who comprise about 40% of Tesla's ownership and have historically backed Musk enthusiastically, could tip the scales despite institutional hesitance. Polls on X show over 70% support, but proxy firms' sway with Vanguard and BlackRock—holding 14% combined—looms large. A rejection could trigger not just leadership upheaval but also further lawsuits, eroding Tesla's aura as an innovation powerhouse. As Denholm put it, the choice is binary: incentivize Musk to "reimagine humanity's future" or risk reverting to "just another car company."
Broader implications ripple through corporate America. This saga has intensified scrutiny on executive pay, with Delaware's corporate-friendly reputation under fire—prompting a November 5 constitutional challenge to a new law shielding directors from such suits. For Tesla, it underscores the high-wire act of tying fortunes to one man's genius amid ethical debates over his political entanglements, from DOGE advisory roles to X platform controversies. As the November 6 deadline nears, all eyes are on whether shareholders will bet big on Musk's galactic ambitions or demand more earthly accountability.
