Tesla’s annual general meeting, or AGM, on November 6th is set to be one of the most contentious in the company’s combative history, moving far beyond typical proxy season formalities. The focus is squarely on the company’s commitment to sound corporate governance, especially following a series of controversial decisions regarding CEO Elon Musk’s compensation and his expanding universe of outside ventures, like xAI and SpaceX.
At issue is a $1 trillion pay package conditioned on Musk achieving ambitious targets including an $8.5 trillion market cap and delivering tens of thousands of robotaxis. The compensation proposal comes even as a 2018 award of $56 billion is disputed in court.
As voting approaches, shareholders are confronting proposals that challenge the very structure of corporate accountability. Opposition to Musk’s pay package is testing the board’s oversight and setting a key precedent for executive accountability. Groups like the Shareholder Rights Group and SOC Investment Group, along with public officials, are pushing for stronger corporate governance and urging investors to reject the excessive compensation plan.
Proxy advisors ISS and Glass Lewis have advised clients to vote against the “astronomical” $1 trillion compensation package.
The compensation conundrum
At the heart of the accountability debate is Musk’s compensation, which has drawn renewed scrutiny and reignited concerns after a Delaware court ruling invalidated his prior $56 billion (2018) pay package. The board has responded to this legal challenge with two highly controversial actions:
- A $29 billion “interim equity grant”: On August 4, 2025, the Board approved an approximately $29 billion restricted stock grant to Musk without a shareholder vote. Directors characterized this as a “first step, good faith payment” designed to adhere partially to the invalidated 2018 deal and keep Musk engaged.
This action circumvented the Delaware court’s ruling and critics say it raises serious concerns about the Board’s fiduciary duty. The award was also structured to avoid being reported as an expense under accounting rules (ASC 718) by classifying it with an “improbable performance condition,” suggesting the company anticipates the grant will be forfeited if the original 2018 options are restored on appeal. - An even more massive 2025 CEO performance award: Shareholders are being asked to approve a massive new compensation plan, that would grant Musk some 424 million shares worth as much as $1 trillion.
To receive the full award, which the Board defends as uniquely ambitious and necessary for retention, the proposal requires Musk to create approximately $7.5 trillion in additional market capitalization value for shareholders.
The new award is intertwined with the interim grant; if the Delaware Supreme Court eventually restores the 2018 pay package, Musk is expected to forfeit or return the interim award to prevent a “double dip.”
The board that won’t say no
The structure and independence of Tesla’s Board of Directors remain a key area of governance risk, amplified by the Tornetta decision, which cited the directors’ “extensive ties” to Musk and lack of effective oversight.
- Director Re-Elections Proposal 1 asks shareholders to re-elect Class III Directors Ira Ehrenpreis, Joe Gebbia, and Kathleen Wilson-Thompson. These directors face opposition due to concerns over their perceived lack of independence from the CEO.
- Chair’s Role: Board Chair Robyn Denholm, whose independence was questioned in the Tornetta decision, played a critical role in approving the controversial $29 billion interim grant. Ms. Denholm has reportedly received a significant amount in cash and stock during her tenure on the Board.
The CEO’s divided attention problem
Musk’s numerous outside ventures—including SpaceX, Neuralink, X Corp., and most recently xAI—raise significant concerns regarding his focus and Tesla’s resource allocation.
- Diversion of AI Resources: Concerns have been raised previously regarding Musk directing Nvidia AI chips reserved for Tesla to his other ventures, specifically xAI.
- Shareholder Proposal on xAI: A shareholder proposes (No. 7) the Board authorize an investment in Musk’s xAI, signaling investor concern about how Tesla assets or capital might be used to benefit Musk’s private companies.
The power grab
Several shareholder proposals are aimed at reforming the basic corporate structure to improve accountability:
- Proposal 12 seeks to amend the bylaws to require the annual election of every director, a move aimed at enhancing director accountability.
- Proposal 13 seeks to remove the requirement for supermajority votes for major decisions, which currently shields management from legitimate shareholder input despite 53% support for the change last year. Instead, future proposals would require a simple majority.
- Proposal 10 aims to repeal the 3% ownership threshold required to bring derivative suits. The current rule makes it extremely difficult for small shareholders to pursue legal oversight, effectively limiting this critical mechanism to the largest institutional investors (outside of Musk, potentially only Vanguard, BlackRock, and State Street).
Shopping for a friendlier court (Delaware vs. Texas)
In 2024, shareholders voted to move Tesla’s legal domicile from Delaware to Texas, a shift championed by Musk after the Tornetta ruling. Critics view this relocation as an attempt to leverage a potentially more favorable judicial environment in Texas compared to the rigorous oversight historically provided by the Delaware Court of Chancery. This context underscores the deep tension between Tesla’s leadership and the courts. The implications are significant.
Musk’s recent stock purchase could signal that he believes the company will hit its ambitious goals, or at least that he is willing to stake his personal wealth on it to project strength. Whether this move inspires confidence or raises concerns about concentration of power, it heightens the tension surrounding Tesla’s future.
As the November shareholder vote approaches, all eyes are on Musk and Tesla’s board. Can Tesla realistically meet the extraordinary growth targets outlined in the proposal? How will this bold purchase influence both short-term trading and long-term investor trust?
Elon Musk’s $1 billion bet may restore faith in Tesla, or it may prove to be another ploy to incite chaos. Either way, the time for passive ownership is over. Shareholders must now exercise their fiduciary duty to demand board independence and reject the controversial compensation and governance proposals outlined in the proxy materials.
Building accountability through investor action
Across the country, advocates are mobilizing to protect shareholder rights and strengthen governance standards. My organization, Climate Finance Action, collaborates with labor and public finance leaders to educate trustees, union members, and state financial officers on these issues, helping them understand how governance failures, such as those at Tesla, can expose funds to long-term risk.
Aligned with investors, advocacy groups, and public financial officers – fiduciaries of state pension funds – CFA supports coordinated efforts to strengthen investor protections, oppose excessive executive pay, and ensure pension trustees and other asset owners are equipped to act decisively and vote in alignment with sound governance principles.
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Mary Cerulli is the founder of Climate Finance Action.
Guest posts on ImpactAlpha represent the opinions of their authors and do not necessarily reflect the views of ImpactAlpha.
