.svg)
Under its Wealth-Focused Policy, Egan-Jones recommends shareholders vote FOR Tesla’s 2025 CEO Performance Award while under its remaining “off-the-shelf” policies, Egan-Jones recommends shareholders vote AGAINST the Award.
On November 6, 2025, shareholders of Tesla will vote on several proposals, including employee compensation plans, pay plans for Mr. Elon Musk, and various shareholder proposals related to bylaw amendments, supermajority voting, and more.
The most controversial and closely watched item is the 2025 CEO Performance Award, which has drawn attention for potentially granting Mr. Musk compensation valued at approximately $1 trillion. However, it is essential to understand the specific features of the Award.
The equity incentive plan consists of twelve tranches, each tied to a combination of production, EBITDA, and market capitalization objectives. Any unearned tranches after ten years will be forfeited.
To earn the full award, valued at approximately $1 trillion, Mr. Musk must achieve each of the following milestones¹:
Mr. Musk has ten years to achieve these goals; otherwise, unearned shares will be forfeited.
Historically, shareholders have approved prior CEO Performance Awards at Tesla – specifically the 2012 and 2018 plans (the latter effectively voted on twice). However, the 2025 Award has generated significantly more debate due to its unprecedented potential value, far surpassing any previous CEO compensation package.
Research reports and recommendations are built from the ground-up for each of Egan-Jones’ off-the-shelf and custom policies. Because of this, different recommendations may be reached for the same proposal under different policies – as is the case for Tesla’s 2025 CEO Performance Award.
The Wealth-Focused Policy emphasizes holding directors accountable for company performance and ensuring that executive pay is aligned with that performance. Deviations from market-standard governance practices are not generally seen as a material risk to the company under this policy. In the case of the 2025 CEO Performance Award, the pay package is entirely aligned with performance – if Mr. Musk fails to meet the specified milestones, he will receive nothing. If he succeeds, both Mr. Musk and shareholders stand to benefit significantly. Specifically, Mr. Musk will earn an additional 12% of Tesla stock and shareholders of Tesla will see an approximate 800% increase in the value of their stock over ten years – significantly outpacing the historical performance of the total market. Thus, the interests of shareholders and Mr. Musk are aligned and under the Wealth-Focused Policy we therefore recommend shareholders vote FOR the Award.
The Blended, ESG, Catholic, and Taft-Hartley policies also emphasize pay-for-performance but incorporate additional governance and risk considerations as well.
Under these policies, concerns arise regarding potential shareholder dilution and governance concentration:
Social Risk Considerations
Additionally, under the ESG, Catholic, and Taft-Hartley policies, where social risks are considered material, we considered the excessive nature and large discrepancy in pay between Mr. Musk and the broader Tesla workforce. For context, if Mr. Musk’s proposed equity stake were distributed equally among Tesla’s approximately 125,000 employees, each would receive roughly $8 million worth of stock. Such an imbalance may contribute to employee morale challenges and represents a potential long-term risk to Tesla’s human capital management.
After considering these factors and the emphasis of these policies on market-standard governance practices, we recommend shareholders vote AGAINST the Award under the Blended, ESG, Catholic, and Taft-Hartley policies as the governance risks of the plans outweigh the potential benefits.
Egan-Jones seeks to clearly define and faithfully implement its policies for each proposal so that recommendations are:
While the proposals at Tesla’s 2025 annual meeting are complex and unconventional, Egan-Jones’ framework is designed to deliver recommendations that remain faithful to the guiding philosophy and principles of each policy.
[1] The Administrator has the power and authority, in good faith and subject to its fiduciary duties, to construe and interpret the 2025 CEO Performance Award and adopt rules for its administration, interpretation and application of its terms. All actions taken, and interpretations and determinations made, by the Administrator in good faith with respect to the 2025 CEO Performance Award will be final and binding on Mr. Musk and any other interested persons. (See Page 70 of the proxy statement)
[2] The first tranche milestone is a market capitalization of $2 trillion; the next nine tranches thereafter each require an additional $500 billion in market; the last two tranches each require an additional $1 trillion in market capitalization. (See Page 60 of the proxy statement)
[3] Tranche 1 requires $50 billion of Adjusted EBITDA; each tranche thereafter requires additional Adjusted EBITDA until tranche 7 as tranches 6 through 12 require $400 billion in Adjusted EBITDA. (See Page 61 of the proxy statement)
[4] As of writing, Tesla has already delivered approximately 8 million EVs.