Why Tesla shareholders should reject Musk’s trillion-dollar pay package

As Maryland’s Comptroller, not only do I lead an agency that sees the numbers that tell the stories of how Maryland families and businesses are doing, I also help oversee the retirement plan that oversees the state investments for 400,000 of those families in my role as vice chair of the state pension board. To ensure that our teachers, emergency responders, and other public servants can retire with dignity, I focus on taking a long-term approach and engage with companies to promote responsible corporate governance to achieve better value. That’s why I am proud Maryland’s state plan will be voting against the proposed pay package for Tesla CEO Elon Musk, and I personally encourage other shareholders to do the same.

UPDATE: With new Tesla pay package, Musk could become history’s first trillionaire

My opposition to this pay package is fundamentally about fiduciary responsibility, though I have concerns about Musk’s political activities and use of social media to amplify conspiracy theories and misinformation, and the role he played in firing thousands of Marylanders who have devoted their lives to working for our federal government. Tesla’s recent governance decisions set a dangerous precedent for publicly-traded corporations, concentrating unprecedented wealth and power in one person while diminishing shareholder rights.

In May, Tesla changed its bylaws to require shareholders to own at least 3% of the company before bringing lawsuits — a threshold only Musk and a handful of large institutional investors can meet. This severely weakens shareholder accountability. The $1 trillion pay package announced in September compounds these concerns.

To unlock the full pay package, Musk must achieve challenging benchmarks, including growing Tesla’s market capitalization from $1.4 trillion to $8.5 trillion — making it twice as valuable as Nvidia, currently the world’s most valuable company at $4.4 trillion.

But the compensation lacks any sense of proportion. If Tesla reaches this milestone, one might justify paying Musk two, three, or even five times what Nvidia’s CEO earns. Instead, at $1 trillion over 10 years, Musk’s pay would be 2,000 times larger than Nvidia CEO Jensen Huang’s most recent compensation package. In fact, his annual compensation would exceed the combined pay of every S&P 500 CEO — by tenfold. If approved, it could set a new benchmark for CEO compensation that escalates executive pay across corporate America.

That’s not generous. It’s wildly excessive and irresponsible.

Even more troubling, Musk receives unprecedented compensation for achieving benchmarks that appear relatively modest. The first tranche requires growing market capitalization to $2 trillion — below average long-term market growth — and delivering 1.2 million vehicles annually, considerably lower than Tesla’s deliveries in each of the last two years.

For achieving below-average growth and declining deliveries, Musk would receive approximately $8 billion — still orders of magnitude larger than any other CEO’s compensation. By comparison, Toyota delivers 10 million vehicles annually, and its highest-paid executive received $13.4 million last year.

Most Americans — including majorities across party lines — believe “the economic system in this country unfairly favors the wealthy.” Rewarding the world’s richest person with an obscene and unwarranted trillion-dollar package exemplifies this problem. It highlights an imbalance so vast, it rivals the scale of entire public sectors. The proposed compensation plan will exceed the combined annual compensation of the entire U.S. federal workforce or all public-sector teachers nationwide.

This plan reflects serious corporate governance failures at Tesla and sets a dangerous precedent for all publicly-traded companies, shareholder rights, and the long-term health of our financial markets. As a fiduciary responsible for Maryland public employees’ retirement security, I cannot stand by. Our plan is using its shares to vote against this pay package on November 6, and I urge other shareholders to do the same.

Brooke Lierman is the Maryland Comptroller.