Decision Day Nears for Musk's $1 Trillion Tesla Pay Deal

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00:00You are a retail investor in Tesla, and you're very active within the ex-community of

00:04Teslarati or Tesla retail investors more broadly, Professor Anderson. But just lay it out for us

00:10as an active investor. Talk to us about the goals, the milestones, how you interpret them,

00:16as well as being a professor in corporate governance. Are they that hard to achieve

00:20for Elon Musk to get what could be up to a trillion dollars in pay?

00:24Yeah. Well, thank you for having me on. I mean, there's been a lot of talk about

00:30how large the potential awards are here, but I think there hasn't been enough talk about how

00:35ambitious this plan actually is, requiring Elon Musk to grow this company to $8.5 trillion in

00:44market capitalization and $400 billion in EBITDA. So I think this is ultimately a question of what

00:53will this company be able to retain Elon Musk, who I think it's fair to say his value has been

00:59priced into the shares already quite significantly. And it's more than just, in my opinion, more than

01:06just a good idea to approve this pay package. It's actually essential for this company to transition

01:12to the next stage that's contemplated by the award. You talk about the $8.5 trillion that they need to

01:18reach in terms of market cap, but there's also the milestones, 20 million cars, 10 million NFS,

01:23you've got to see one million robots out there, an army that he calls them. But Professor,

01:28what's interesting is some have pointed out potential caveats here. They've talked about

01:31the board potentially being able to award him perhaps the first three tranches of the money

01:36promised if perhaps the milestones were interfered with in some way. Maybe it's disastrous war,

01:43maybe it's interference by government, but also just other unspecified circumstances. So does that

01:48give you any pause from a corporate governance perspective? Well, I mean, not, not really. I mean,

01:55it's normal for force majeure type considerations to be taken into account. I mean, somewhat,

02:00somewhat ironically, when ISS recommended a vote against it, it, you know, took into account that it

02:09specified that there was a lack of precision in some of the milestones, but also simultaneously said

02:16that the milestones didn't give the board enough discretion in the future to adjust it. So,

02:21you know, I think there's, it's a no win situation in terms of writing a plan like this, because

02:25obviously unexpected events can occur that you can't fully anticipate in writing the plan.

02:31So I don't think, I don't, I don't think those are particularly problematic. I mean, you know,

02:37I think probably the most common criticism I've heard is that the initial, the first step of the

02:43milestone at $2 trillion market cap, people would say, have said it's, it's too easy to achieve.

02:50But I think what that fails to appreciate is that the market is already priced in the fact that it

02:57believes this pay package will pass and that Elon will be retained for at least some period of time.

03:02So it's priced in his value already. And it's a situation where he's kind of cursed by his own

03:08success of, you know, making the milestones easier to achieve because it's already priced in,

03:13the value of it, of his contribution. So, you know, I, I sort of feel like some of the criticisms

03:19have been a bit unfair in that regard. Well, some of the criticisms more broadly have been almost

03:24reminiscent of what happened in 2018 and the idea that basically corporate governance is lacking

03:29because a lot of people on the board are too close to him. How do you think that this pay package

03:32in 2025 answered that? Yeah. So, I mean, the, the pay package now had the benefit, if you want to

03:39call it that, of a completely adjudicated, uh, Delaware opinion, um, on that 2018 pay package.

03:46So they were able to address just about everything, um, that the chancellor, uh, identified in that,

03:52including a totally different, um, having a special committee this time with totally different

03:57composition, um, addressing all the procedural aspects, uh, that, uh, the chancellor took issue

04:03with in the, in the court opinion, as well as, um, producing a extensive report, um, that is more

04:10extensive than anything that I recall seeing in recent memory, um, to, to try to address all those

04:17concerns in addition to, of course, um, the shareholder vote. Mm. You are, of course,

04:22a shareholder. Musk himself is a significant shareholder. He wants to be more of a significant

04:26one. He's got about 15% that he could put weight behind. He, in Texas, is allowed to vote for his

04:31own pay package in this respect. So many say, actually, this is just going to pass, but it's

04:35more a idea of the court of public opinion. They need to pass with such a majority to prove that this

04:41is borne out right. What do you make of that, Rob? Do you think that it's, it's will pass with flying

04:47colors in that respect and enough to stop the criticism continuing? I think it will. Yeah.

04:52I think the, um, I think the shareholders other than, than Musk and Kimball will vote, um, very

04:58substantially in favor of it. Frankly, um, the, the main criticisms I hear are certainly not coming

05:04from the retail shareholders, um, who, uh, overwhelmingly are not just supported, but I

05:10think are, are nervous that it won't pass by, by enough. Um, and I think, you know, the, the value

05:16that, that Musk brings this company, uh, it's, it's undeniable. Um, if, if, um, if he left tomorrow,

05:24you can imagine what would happen to the stock price. And so, uh, I think it's unfair not to

05:30give him the benefit of that, of the fact that the stock price has gone up by looking at it now at

05:35130, $30 since this pay package was even, uh, uh, uh, announced, right? So the market loves it. I,

05:45I don't see any criticism there really. It's just the sort of rigid voting restrictions of the, uh,

05:52proxy advisors that are going to be the obstacle here. It's the cookie cutter approach they have

05:57to apply because they have to try to treat Tesla like every other company when it's,

06:02it's not similar to a hired, uh, CEO who's come in from the outside to manage a mature company. This

06:08is a, a founder led company.

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