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Tesla's board has made an unprecedented proposal for a compensation package for its CEO, Elon Musk. The total ward value could be up to one trillion dollars, but it is set against mandatory targets that have a high bar. Both operational and financial investors' shareholders are going to vote on that package in November, but many of those shareholders still have questions. To answer the questions, the chair of Tesla's board, Robin Denholm, is with us. Thank you, Robin for your time.
This proposed package was about Tesla's long term goals as much as it was about retaining Elon Musk. But why is it so crucial to the board's mind that it is Elon Musk that is able to get Tesla to this future?
Well, thank you, Ed. I think it is a pivotal time at Tesla and also in the world in AI and autonomous and the application of AI is its transformative technologies, and we believe it. Tesla in big ambitious goals, and so Elon put out the master plan for on the
first of September, very auspicious day. I think in terms of putting out the vision for the company for the next decade or more, and AI and autonomous is at the front and center of that, both in the vehicles but also in our Optimus lineup and what we're doing from a robotics perspective as well. And so having the boards of responsibilities to look at who the CEO is for the next period of time, and we believe that Elon is the right CEO for Tesla over this transformative
period of time. And our view is he's a generational leader. Aren't any other people out there like Elon who can actually lead the company over this next decade or so, And so once you decide who the leader should be, you need to put in place a compensation package to incent and motivate him to actually deliver against the ambitions.
The motivational piece is interesting in the course of the proxy as you read it and negotiation plays out, doesn't it seven or eight months, but that there were sticking points on both sides. What were they.
Well, obviously in any discussion around the future of the company, but also the future of an individual in terms of what motivates them is very important to understand that. And from a board perspective, from a special Committee perspective, as we've outlined in the proxy, we had a very fullsome process. We had more than ten meetings with Elon in terms of understanding what were his motivations, what does he want
to do over this period of time. And having worked with him now I've been on the board for eleven years and Kathleen Wilson Thompson, now other amazing Special Committee member, has also been working with him for the past six or seven years as well, And so from our perspective seeing him in the boardroom, but also understanding what motivates him, it's things that other people can't do. It's what the
company could do that no other company could do. So those types of things are what are in this plan. And so, as you said in the outset, it is a zero compensation package unless he delivers against pretty ambitious goals for the company.
Ambitious goals that include twenty million vehicles, that include ten million FSD that think about a million robots and robotaxes. Robin tell us, from your experience with the twenty eighteen pay package are in the investi base really wants to understand how structurally this is different.
Yeah, So for us, the framework of the twenty eighteen plan worked very very effectively, and so this package, this framework that we've put in place for the twenty twenty five proposed compensation package, has twelve tranches, twelve market cap goals, where the top goal is eight and a half trillion
dollars and we're just over a trillion dollars today. The first milestone on the market cap side is a two trillion dollars, so we've got almost double the size of the company before any of the market cap goals are actually achieved. And then it increases by half a trillion up into the last two tranches, where there's a trillion dollar jump each time. And then on the operational side,
to your point, Caroline, they're very ambitious. We're just over eight million cars that have been produced and delivered at Tesla. The milestone on the vehicle side is twenty million vehicles, ten million FSC paid subscription areas. So to me, these are ambitious goals, and not to mention what we're what we've proposed in terms of the goals around our robotics areas, our optimists and bots a million of those and robotaxis and so to me, it really brings the master plan
for to life within this compensation package. Because they're the goals that Elon has, it's the goals that the company has as well.
Some had worried that Elon's goals had turned more towards politics, and you draw him back from that within the proxy, and he's agreed to wind down his political activity. How do you define political activity.
Robin, I think you know, from my perspective, this is a package that really motivates Elon. So having him front and center at the company and delivering against really ambitious goals, to me, is great for him. It's great for the company. It's also great for shareholders, and as we've outlined, the shareholders in this proposal actually win very extensively with that market cap at eight and a half trillion dollars in
order to achieve this compensation package. To me, that actually is one of the things that all shareholders will benefit by. And so from a politics perspective, obviously we're in a democracy, so everybody gets to voice their points of view. I think Elon having served as a special government employee, he obviously completed that activity and he is back and front and center at the company these days.
But did those reassurances go as far as to Elon Musk agreeing not to specifically participate in any one political party another government role extend to whether or not he makes donations in a political cycle.
Yeah, I mean what he does from a personal perspective, in terms of his political motivations, etc. Is up to him. I mean, clearly from our perspective as a board, we're measuring him on results and measuring him on what he does as a CEO of Tesla and our viewers. He's delivered big time in the past, and you know, we look forward to him doing that in the next era.
Robin, you've just been unequivocal about the future of the company and the inclusion of those operational milestones on Optimus and Robotaxi. But when the proxy hit many many shareholders went straight to the bullet point on the twenty million vehicle deliveries. How much was that informed by the board wanting Elon Musk to focus on the bread and butter business in the near time. But also did you have some data that sales specific were being impacted by Musk's political activity.
Yeah, I would say that vehicles are our mainstay of our business today, so is the energy business. A lot of people forget about this brilliant business that we have on the sustainable energy side, and so from our perspective, from a board perspective, they are the revenue drivers of the company in the near term. But obviously in the plan you can see that there are other areas of revenue activity and profitability and growth for the company in what we're doing with AI as it relates to optimists,
but also FSD and beyond. And you know, we've put pretty ambitious goals out there in terms of the EBITTER and so I think, yeah, the profit in terms of having four operational goals around product, but also four pretty extensive six actually pretty extensive goals around the profitability of the company as well. And you can't do that without selling fabulous products that customers want.
Fabulous products that people have to want to buy, and sometimes because of the brand of the person who built them. I just ask a little bit again, did you think sales were hit by his political activity?
So my view is over the long term, people buy things that they really love, and Tesla vehicles things that people really love. You know, it doesn't matter who you are. The minute you get into a death Tesla and you drive that car, you know what that experience is like.
And so from our perspective, focusing on products that customers love, that our consumers are both in the vehicle space and in the energy space, really do enjoy using and appreciate in terms of not only the technology aspects, but also how the vehicle responds, the user interface, those types of things. So again, we're a products company. We love building things that people love.
And we can see the future products just behind your shoulder as well. With Optimists and Robin. What's been so interesting is the push from Elon's side in the ten times you met him and the negotiations and indeed on X's platform to have more voting control and have more ownership of shares. Can you tell us a little bit about how you weigh that as a board and as the chair.
Well, clearly Elon's been very public in terms of the things that he motivates him and what actually he wants
over this next period of time. So as a special committee as a board, that's actually easy to work with because when you're designing a compensation package, you're looking for the things that will motivate an individual to do thing above and beyond the mainstay, and so clearly voting rights important to Elon, particularly in this era as we're developing products around artificial intelligence, autonomous those types of things where we could use products for good as opposed to any
nefarious activity with the products, and so he's been very clear on that, and so for us as a special committee, taking that information and then working through what were the right goals in order for him to earn those voting rights is really important. And again I'll say again that it's a zero plan if he doesn't achieve the goals, So each charch is worth a one percent in terms
of voting rights. They kick in when he actually hits the goals, both an operational goal as well as a market cap goal, and then the economic benefits are delayed beyond that period of time, which is a difference in the plan that we structured in twenty eighteen. So bifurcating the voting rights versus the economic benefit actually has a huge retentive effect, and so from our perspective, that's one of the key levers that we used in the plan.
You're joining us on Bloomberg television and radio around the world. This is Bloomberg Tech Live at Tesla in Palo Alto, where we're speaking with the chair of Tesla's board, Robin Denholm, about the proposed compensation package for Elon Musk that investors will vote on in November. In the proxy, again, it's very clear if one is to go and read it that Elon Musk essentially said to the special Committee that
my priority is the voting power. But you know, if my motivations aren't met, I am interested to go and pursue other interests. What was the kind of absolute for the board on your side? You know, I'm trying to understand both Caroline's question on you know, I think Musk wants the voting power so that he can focus on this AI future. But in return to hand over that voting power, what is it, Robin, that you wanted to ensure?
Yeah? I think you know, as I said before, Alan's a unique individual. He can apply his time, effort and energy into different endeavors. He has different endeavors out there. Of what the board sought to do through this plan is to actually have him focus, you know, an outsized proportion of his time, effort and energy on Tesla, because when he does that, shareholders win.
Might I just add that what's kind of missing from the proxy. It's not codified. But you are calm, sanguine, comfortable with him also being the CEO at another company, private company, or having another leadership position across multiple companies. That's okay, Yes, it is okay.
It is how he's delivered in the past. And you know, from our perspective, actually having his creative energies in various endeavors that are outside of Tesla actually helps Tesla. Yes, And now that sounds perverse and people don't really understand that, but having worked with him now for eleven years, it actually benefits Tesla with him doing things that are not in the mission of Tesla outside of Tesla, both from
a resource perspective but also from a motivation perspective. And so I think to really understand that point is to understand Elon and how he actually works. And so that's what the board sought to do through this plan Succession.
The latter tronches directly relate to Elon Musk's participation in succession planning and the successful implementation of that succession planning.
You started this conversation by saying, there isn't any like Elon Musk given that this is a decade long plan, So maybe succession after a decade is more timely than do you have confidence as aboard there are leaders already within Tesla that could potentially step up when he's gone, or are you already starting to speak with Elon Musk about external candidates, those that are nearest to him, you know, in that level of extraordinary ability that you see in him.
Yeah. So clearly, succession planning is a very important responsibility for the board and we take that responsibility very seriously. I meet with investors all the time, and I will say it's probably my number one question that I get in terms of consistency of feedback from investors around succession planning. And so from our perspective, we obviously have a plan if something untoward to it to happen in the near term, but we also want to have and do have a
longer term succession plan. Now, this plan, this compensation plan, is a ten year plan. Elon will be sixty four or close to sixty five by the time this plan completes. At some point he will want to ease back. Maybe he doesn't believe that today, but at some point he may want to do that. And so we want to make sure that we have the right leaders in place to do an orderly transition at some point in the future.
And so making that part of this plan was a very deliberate activity, and obviously he was part of that discussion as well, and he is part of the discussion on an ongoing basis that the board has around succession planning, the talent that we have. We have extraordinary talent inside of Tesla, across many facets of the company, and so making sure that we're continuing to develop those leaders but also bringing in talent. And you know that's the other part.
It's in the report as well, and that Elon is a talent magnet, particularly on the engineering side, that we have extraordinary depth in the AI space, in the engineering space, in the manufacturing space, and largely because he works with them day in and day out. And so that's one of the unique aspects to this and also one of the unique aspects to the plan is to make sure that we have that visible succession plan as we near the end of this decade long compensation packet.
Robin, what you just said was really interesting, the fact that there is a plan in place if something untoward would happen. Can you spell out what that would look like in the here and now?
No, I won't go into details here, but from my perspective, it is a responsibility the board takes very seriously. And you know Elon has participated in that. We have leaders in geographies that run large portions of the organization. We have a really extensive executive team, and as I said before, Elon works very closely. He's a hands on leader both in the engineerings places, but also across the board from an operational perspective as well.
And I realized that was a sensitive question to ask, and forgive me, I will ask another sensitive one because it is a time of sensitivity. We've just had the death of Charlie Kirk. We've had Musk himself on his own platform X raising questions well about his own security and the fact that he has focused on it. I know it's something that you are focused on. What is the view, baores view on terms of upping his own security right now?
Yeah, so very tragic circumstances this week. I think there isn't anybody in a boardroom that isn't touched by what's happened with Charlie Kirk, and also you know, there have been other incidents you know, in the executive world over the last twelve months that I think every board stops and thinks about security of their CEOs but also their executive team. And it's no different at Tesla. We have been focused as a board on inland security for many
years now. He's been very public and very much out there, and so it is something that we takes it very seriously. He takes it very seriously as well, and so so again from a board perspective, it is something that we've discussed at.
Length, Robin. There are a number of other proposals in the proxy. One is a shareholder initiated proposal for Tesla to invest in Extai. It is non binding. The board doesn't take a position, but how does the board think about it. For example, if investors would say no, we don't want Tesla to make that investment, with the board still look to pursue it independently.
So clearly there are sixteen proposals overall in the proxy. I know we've spent quite a bit of time on one important one on compensation, but the Xai proposal is a shareholder proposal that has been put into the board. We value our shareholders input and the reason why we have not put a recommendation is we want to hear from shareholders in terms of what their views are as to whether or not we should make an investment in XAI. Well, one thing I will say at the outset is there's
a lot of misunderstanding of AI in the marketplace. It is not one thing, okay, it is a range of technologies. What Tesla is doing today with AI is quite different to what XAI does. XAI is working on fundamental areas in AI, but it's also working on large language large language models. That's not what Tesla's doing. As you can and see behind me. With Optimists, we're taking real world application of AI and putting it into physical products to
actually empower those products to do things. So with Optimists, it's very visual. You can see what he does in terms of visualizing things and then actually doing things. And the same with the vehicle. So what we're doing with AI within FSD is actually taking that visual data and using that to drive the car. And so that's quite different to what an XAI does.
Robin a very quick question, and then we will end on the final proposal for the compensation package. This week, Bloomberg reported an investigation about some fatal incidents where passengers or those inside the vehicle had difficulty using the manual release. Now, as you know, I drive a test a vehicle, You drive a test a vehicle. All I want to ask is the board aware of that reporting and will it raise that issue with Elon And is Tesla looking at the design of the door manual override.
So I can tell you that the board takes very seriously any safety related reporting or any incidence of any type globally in terms of what we look at. But in the Tesla there is a manual override already, and in fact it's been reported on that you can actually manually open the door if there is a power event or anything like that. So safety is our number one factor in terms of what we're doing.
And Tesla ranks very highly on safety, very highly.
It's also why we're pursuing FSD because you know, just in North America there are fifty thousand deaths on the road. That's fifty thousand too many, and so and we know with the data that we have for FSD that it's actually safer than a human drive because of those fifty ninety four percent of human error. So if you can eliminate five percent of that, that's a lot of deaths that you can avoid. And so again, safety is one of our key priorities in any aspect of the business.
Let's end on this unprecedented proposal, and I'm going to ask you this, what would happen if to Tesla if Elon Musk left tomorrow, you know, in order to try and help shareholders understand the board's motive here in keeping him. But there was one specific question from our audience which I really appreciated. Why does Elon need to be CEO? Could he not take on a more technical role?
Well, that is contemplated in the package. Just like in the twenty eighteen package. We want his service at the company. He can be the CEO, but he can also be in another role, whether it's Chief product officer or that type of thing. We've contemplated that before. But to me, I think the really key thing is that shareholders get to vote on the future of the company, not just
on a compensation package. The compensation package is the instantiation of the goals and ambition, the super ambitious goals that we have as a company, and so I think with this proposal, it's really up to shareholders what the future of Tesla looks like.
Robin Denholm, chair of Tesla's board. There is a key shareholder vote in November on what is We've said it an unprecedented proposal on a compensation package for elam Musk, set against very high bar deliverables. But what a conversation Caroline to inform the understanding of some of those deliverables.