Currently, Musk holds about 15% of Tesla’s shares, which coincides with about 15% voting control. In his mind, that number is too small to ensure his job security, so the board has structured the comp package with increasing stock awards that over time could get him up to 25% voting control.

At that quarter-level of voting control, Musk believes he would maintain his role if he is doing a good job, while still allowing shareholders to fire him if, in his words, he “goes insane.”

From his perspective, the concern about his comp package is “asinine,” since as he hits his milestones, investors will be increasingly rewarded along the way.

I’ve looked into what Musk has said over the past month about what he would do if there’s a “No” vote, and he’s been purposefully vague about his next step.

That said, the topic is important enough that Tesla’s board has been doing calls and in-person meetings with large investors in an effort to win their approval. That detail is a tell that the board feels the comp package is central to the company’s long-term success. In other words, the board’s actions suggest that Elon’s time at a minimum will diminish if it’s voted down, and at a maximum, he could leave the company.

It’s important to keep in mind that Elon operates on first principles, which include his views about what’s fair and reasonable.

Based on his closing comments on the last earnings call, it’s clear he believes the package checks those boxes and is in the best interest of shareholders. At the end of that call, Musk said he “just doesn’t feel comfortable building a robot army here and then being ousted because of some asinine recommendations from ISS and Glass Lewis, who have no freaking clue. I mean those guys are corporate terrorists.”

The point of his closing comment is that it underscores the vote has become personal, which means his next move is a wild card.

The fact that ISS and Glass Lewis have recommended a “No” vote mostly impacts index funds, which typically go along with those recommendations. Additionally, Musk has had a somewhat confrontational relationship with institutional investors. Over the past five years, it’s been the retail investor, which accounts for about one-third of ownership, who has stood beside his vision, looking past multiple quarters of challenging fundamentals given the long-term potential of Tesla becoming the leader in real-world AI.

My take is that if Elon leaves outright, the retail investor will also get hurt, and conversely, if he continues to be engaged at the company, those retail investors will benefit. Musk’s loyalty to retail is the latest example of how the institutional investor stands to benefit TSLA retail.

When Norway’s $2 trillion sovereign wealth fund said it will vote against the package, my heart sank. While their ownership is small, with just over 1% of shares, it’s rare for an investor to go public with their vote ahead of the shareholder meeting.

The logic behind them going public with their vote is unclear, but their rationale for voting “No” was clear. They said, “while we appreciate the significant value created under Mr. Musk’s visionary role, we are concerned about the total size of the award, dilution, and lack of mitigation of key person risk, consistent with our views on executive compensation.”

The reason I think the vote will ultimately pass is that shareholders win along with Elon. For starters, the package is rewarded in steps, so investors are not voting on a $1T package, only on the potential for that outcome. The package essentially requires 24 boxes to be checked,  half related to market cap hurdles (where investors win) and half tied to operational milestones. These operational milestones are high hurdles, including 20 million vehicles (cumulative), 10 million paid FSD subscriptions, 1 million “Optimus” units delivered, and 1 million driverless robotaxis in commercial service.

Why wouldn’t an investor be thrilled to pay for that kind of performance? We’ll know the answer to that question after market close on Thursday.

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