Tesla and the trillion-dollar vote

Royal London Asset Management has voted against the CEO’s proposed award due to concerns over the governance process, shareholder dilution and the scale of the award. We also voted against two of the three directors up for re-election and voted for several shareholder proposals.

Markets are no strangers to bold headlines, but even by those standards, the proposals at Tesla’s 2025 Annual General Meeting (AGM) were extraordinary. The new performance award for CEO, Elon Musk, which was approved by the majority of shareholders, could be worth up to $1 trillion (£760bn) [1].

The board’s position is clear: retaining Elon Musk is seen as essential for Tesla’s future ambitions in artificial intelligence, robotics, and its core automobile business. 

Beyond the headlines

The pay award is structured around a series of milestones, including provisions for succession planning. However, the inclusion of a vague ‘deemed achievement' [2] clause, introduces flexibility that could allow some of the most ambitious targets to be considered met, even if not fully delivered.

In addition, the award was formulated by a special committee rather than the compensation committee. In our view, these factors raise significant concerns about the rigour and oversight of governance at Tesla.

Balancing vision with governance

Musk’s role has been transformative for Tesla’s growth and innovation. At the same time, it must be acknowledged that the scale of the proposed award is staggering. It is long-term and performance-based but the potential impact on existing shareholders is significant. Should all or even part of the award vest it will greatly increase the share concentration for Musk, who is already the largest shareholder. For us, the key-person risk is clear.

Succession planning will be critical for Tesla, not just for investor assurance, but for ensuring stability and long-term prospects. Yet this award only requires an established succession plan in its final elements, nearly a decade down the line. That delay leaves open questions about leadership continuity and whether Tesla’s organisational culture can inspire clear, progressive pathways, especially as internal pay gaps between the CEO and senior management will only widen following the award implementation.

Our voting position

After engaging with the company and conducting an analysis of the proposals, Royal London Asset Management voted against the CEO performance award. This decision was based on our concerns not only about the size of the award, but about shareholder dilution and the risk of endorsing a process that circumvents established governance procedures relied upon by investors.

At the same time, we voted for shareholder proposals aimed at strengthening shareholder rights and board accountability, such as removing supermajority voting requirements and enhancing transparency on sustainability and human rights.

Our influence

At Royal London Asset Management, we exercise our voting rights globally and hold companies accountable for their decisions and actions. The voting process is a powerful tool for potentially influencing outcomes and making relevant decision-makers aware of shareholders’ sentiments on important topics.

Our voting always aims to be pragmatic, reflective of local best practice and evolving market insights, and in the long-term interests of our clients. Alongside voting, our engagement, research, and advocacy also help to add value and meaning to our investment decisions. Voting and engagements may not always apply to any specific Royal London Asset Management fund or strategy, as each will have different investment objectives. Please check your prospectus for details on specific product objectives.

Voting decisions

[1] Elon Musk's $1 trillion pay package approved by Tesla shareholders - BBC News

[2] tm252289-4_nonfiling - none - 58.4302738s

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For professional investors only. This material is not suitable for a retail audience. Capital at risk. This is a financial promotion and is not investment advice. Past performance is not a guide to future performance. The value of investments and any income from them may go down as well as up and is not guaranteed. Investors may not get back the amount invested. The views expressed are those of the Royal London Asset Management at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.