California public pension fund votes against Musk’s $1 trillion Tesla pay deal

California Public Employees’ Retirement System (CalPERS), the largest public pension fund in the United States, announced Thursday that it will vote against Elon Musk’s proposed $1 trillion, 10-year compensation package at Tesla Inc.

The fund currently holds approximately 5 million shares in Tesla, with an investment worth more than $2 billion in total.

CalPERS’ statement on the compensation package centered on the total size of the plan and Musk’s power consolidation from the deal. According to the pension fund, the pay deal, “more than pay packages for CEOs in comparable companies by many orders of magnitude,” poses governance risks for regular shareholders.

Tesla’s proposed plan ties Musk’s pay to aggressive performance targets for market capitalization, earnings, and innovation. Following that arrangement, Musk could own more than a quarter of the company, thereby gaining a significant voice on the board.

Musk could earn 12% of Tesla’s stock if the proposal is approved

The shareholder vote is scheduled for November 6, 2025, in Austin, Texas. CalPERS’ opposition is expected to influence other institutional investors, who may weigh in on the package’s governance implications.

In the weeks leading up to Tesla’s annual meeting in Austin, founder Elon Musk has been working hard to win support for the pay deal. He spent much of Tesla’s earnings call this month defending the pay package and criticizing the firms advising investors to reject it.

Under the proposed $1 trillion pay package, Musk would need to meet a series of performance targets over 10 years to receive the total amount — potentially giving him control of at least a quarter of Tesla. The plan would award Musk up to 12% of Tesla’s stock, valued at about $1.03 trillion, provided the automaker grows its market capitalization to $8.6 trillion over the next ten years.

It would also secure Musk’s influence over Tesla and its robotics plans, which he has been publicly demanding since early last year. The firm’s chairwoman, Robyn Denholm, had earlier defended the plan, arguing that it was meant to keep Musk driven and committed to Tesla’s goals.

She noted, “If he performs, if he hits the super ambitious milestones that are in the plan, then he gets equity, it’s 1% for each half a trillion dollars of market cap, plus operational milestones he has to hit in order to do that.” 

However, critics have argued that Musk doesn’t need extra incentives since he already owns the largest stake in Tesla, and that the deal could heighten dilution and governance risks.

Musk’s previous pay arrangements have not escaped controversy either. CalPERS CEO Marcie Frost said last year that the fund voted against his $56 billion proposal.

CalPERS had likewise rejected a 2018 compensation plan valued at over $50 billion. A Delaware judge ultimately voided that package, though Tesla is fighting the decision.

Some investors had considered replacing Musk

Earlier this year, Musk’s open confrontation with President Donald Trump had unsettled some Tesla investors and analysts, who feared it could distract him from the company and even triggered discussion on a possible leadership change.

In July, Musk declared his intention to found a third political party, the “America Party,” in response to his fallout with Trump over tax and spending legislation. However, Tesla’s board has advised investors to vote down a measure seeking a policy of political neutrality, which aimed to increase oversight of Musk’s political involvement.

Douglas Chia, president of Soundboard Governance, said it was clear Musk held considerable influence at Tesla, and he believed the board and investors would once again give him what he wanted.

For now, Tesla’s board has not yet indicated whether it will revise the plan in response to investor concerns. Analysts say the outcome of the vote could set a precedent for future executive compensation packages in tech and growth companies.

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