Wall Street's Trillion-Dollar Question: Can Anyone Actually Replace Elon Musk?

Wall Street's Trillion-Dollar Question: Can Anyone Actually Replace Elon Musk?

America's biggest pension fund just said no to Tesla's wild compensation plan—and the fight's only getting started

CalPERS dropped a bombshell. The nation's largest public pension fund won't back Tesla's mind-boggling $1 trillion pay package for Elon Musk. Their reasoning? It's "many orders of magnitude larger" than anything any other CEO has ever received.

That declaration cuts right to the heart of something that's been gnawing at investors for months: Can you even put a price tag on someone who might be truly irreplaceable?

Come November 6, 2025, Tesla shareholders won't just be voting on executive pay. They'll be answering whether corporate governance still matters when you're dealing with a genuine disruptor. Whether boards can actually manage visionary founders. And whether—according to institutional money managers poring over the fine print—this whole thing might be the most wasteful retention scheme in modern business history.

Numbers That Don't Compute

Let's talk about what we're actually dealing with here. Tesla wants to hand Musk up to 423.7 million shares over ten years, doled out in twelve chunks. The catch? He's got to hit targets that sound almost fictional: balloon the company's market cap from about $1.45 trillion today all the way to $8.5 trillion. Pull in $400 billion in EBITDA. Manufacture 20 million vehicles annually while simultaneously cracking autonomous driving and building humanoid robots at scale.

Hit every single milestone, and current shareholders get diluted by 13.1 percent. That's out of 3.225 billion shares. Most Wall Street analysts figure he'll land somewhere in the middle, which still means 5 to 8 percent dilution. Here's what that really means: your earnings per share and free cash flow per share need to jump 13 percent just so you break even. Before you see any actual gains.

"Your per-share economics need to climb by double digits just to tread water," one institutional investor told me. "That's not pay-for-performance. That's throwing money at milestones you can't even hedge against."

When Governance Gets Weird

CalPERS holds roughly 5 million Tesla shares—about $2 billion worth. That's only 0.15 percent of the company, but the symbolism packs a punch. This fund has always been hardcore about fiduciary responsibility. They already balked at Musk's 2018 compensation package, that $56 billion deal a Delaware court later tossed out for procedural shenanigans.

The big proxy advisory firms agree. ISS and Glass Lewis both recommend voting no. Too much money. Too much power concentrated in one person. Too much evidence the board's been captured by someone who needs real oversight as Tesla ventures into life-or-death technologies like autonomous vehicles and robotics.

Chair Robyn Denholm's counter-argument is blunt: approve this or risk losing Musk to his other companies. xAI. SpaceX. Neuralink. She's even admitted they're working on succession planning, which is basically acknowledging they've thought about the unthinkable.

But that reasoning makes governance experts squirm. "The whole 'approve or he'll leave' threat is terrible governance," one buy-side analyst explained. "You're locking in a CEO at exactly the moment Tesla needs resilience in its leadership, not total dependency on one guy."

The Street's Verdict: It'll Probably Pass, But It Shouldn't

Talk to enough institutional investors modeling this vote and you'll hear the same thing: it's probably going through, but barely. Maybe 55 to 60 percent in favor. Tesla's got more than three million retail shareholders who worship Musk like a prophet. Momentum players and late-arriving proxies usually break for management. ISS and Glass Lewis opposition will shave off some institutional support, but the founder-worship machine is powerful.

"We're putting 60 percent odds on passage," said one equity strategist tracking the vote. "But we'd vote against it. The asymmetry here is backwards—Musk gets upside on regulatory wins and tech breakthroughs he can't fully control, while minority shareholders eat dilution now and execution risk later."

The trading strategy coming out of this crowd is precise: buy volatility heading into November 6 with straddles or strangles tilted toward downside protection. If the package passes, fade any relief rally. If it tanks, wait for governance reforms—maybe a smaller, phased award with auditable goals and explicit limits on voting power—before jumping back in.

"Short-term we're buying vol, medium-term we're watching fundamentals," the strategist added. "Either way, governance concerns will keep a discount baked into this stock."

Why This Structure Makes Investors Nervous

Here's what really bothers the smart money: the structure itself. Traditional performance pay ties to earnings, cash flow, or return on capital—things you can measure and predict. Musk's milestones mix market cap targets with operational achievements and technological moonshots. Regulatory approval for Full Self-Driving. Humanoid robots actually deployed. Energy storage measured in gigawatts.

These aren't purely financial triggers. They depend on regulatory whims. Will the NHTSA ever grant Level 4 autonomy licenses? They hinge on technological uncertainty. Can Optimus robots actually compete economically with human workers? They're exposed to geopolitical chaos. Will Chinese price wars destroy margins before robots can scale?

"You're paying out on binary vesting tied to things outside Musk's control," noted a portfolio manager running Tesla exposure. "That's not pay-for-performance. That's a massive out-of-the-money call option on stuff he can influence but not dictate."

Context matters here. The median S&P 500 CEO makes $17.1 million annually. The biggest tech and auto packages—Tim Cook at Apple, Jensen Huang at Nvidia, Mary Barra at GM—run $30 to $75 million. Musk's proposal? Exactly what CalPERS said: orders of magnitude beyond anything comparable. It's Musk-exceptionalism written into equity.

History Repeating Itself—Bigger This Time

This isn't Musk's first rodeo with controversial compensation. That 2018 award, structured similarly but worth $56 billion, helped rocket Tesla from a $50 billion market cap past $1 trillion by 2021. It also sparked a Delaware Chancery Court ruling in January 2024 that killed the package, citing board conflicts and lousy disclosure. Shareholders re-approved it in June 2024 after Tesla reincorporated in Texas, but legal appeals continue.

The current proposal is essentially a supersized sequel, floated after Musk publicly threatened to focus elsewhere unless he secured roughly 25 percent voting control. The board calls this existential retention. Critics call it hostage-taking.

Either way, legal risk lurks. "Pushing a far bigger version after Delaware voided the 2018 plan invites lawsuits and structurally higher cost of equity," warned one analyst. "Even if shareholders approve it, you'll have a governance cloud worth 100 to 200 basis points hanging over this stock."

What Genius Costs

The vote is yes or no. The consequences aren't so simple. Approval locks in Musk's control and accelerates bets on robotaxis and Optimus, but it also embeds governance friction for years. Rejection could trigger a 10 to 20 percent selloff as key-person risk gets repriced, but might paradoxically prove bullish medium-term if a tighter, more defensible package emerges.

Here's what we know for sure: on November 6, 2025, in Austin, Texas, shareholders won't just be voting on executive pay. They'll be deciding whether markets can actually price irreplaceability. Whether boards can govern the ungovernable. Whether the cult of the founder can coexist with fiduciary duties owed to millions of pension beneficiaries whose retirements depend on getting this right.

CalPERS already voted. Wall Street's hedging everything. The rest of us? We're watching.

NOT INVESTMENT ADVICE