Vanguard's Shift on Elon Musk's Compensation

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Vanguard initially opposed Elon Musk's massive pay package in 2018 due to doubts about the ambitious benchmarks. However, by 2024, Vanguard changed their stance as Tesla outperformed expectations, leading to a shift in favor of giving Musk the compensation plan. The decision was influenced by the importance of retaining Musk and aligning his interests with shareholders. This move reflects the critical role Musk plays in Tesla's success, highlighting key man risk. Despite Musk's various commitments outside Tesla, shareholders prioritize incentivizing him to stay due to his integral connection to the company. The massive payout for Musk aims to ensure his long-term involvement and is seen as crucial for Tesla's stability and growth, even though the payout does not imply immediate cash receipt for Musk.

We've lived amongst Elon Musk headlines for so long now that it's easy to forget just how much he sounds like a sci-fi character. He runs a space company and wants to colonize mars. He also runs a company that just implanted a computer chip into a human brain. And he believes there's a pretty high probability everything is a simulation and we are living inside of it.

But the latest Elon Musk headline-grabbing drama is less something out of sci-fi, and more something pulled from HBO's "Succession."

Elon Musk helped take Tesla from the brink of bankruptcy to one of the biggest companies in the world. And his compensation for that was an unprecedentedly large pay package that turned him into the richest person on Earth. But a judge made a decision about that pay package that set off a chain of events resulting in quite possibly the most expensive, highest stakes vote in publicly traded company history.

The ensuing battle over Musk's compensation is not just another wild Elon tale. It's a lesson in how to motivate the people running the biggest companies that – like it or not – are shaping our world. It's a classic economics problem with a very 2024 twist.

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