Tesla Board Chair Defend’s Elon Musk’s Humongous Pay Proposal

Most executives who presided over sinking sales and profit and a new product that tanked would be looking for a new job. Elon Musk, the chief executive of Tesla, could instead receive the largest compensation package in corporate history.

On Friday, the chair of Tesla’s board of directors defended the trillion-dollar compensation plan for Mr. Musk that the carmaker unveiled in a regulatory filing last week. In an hourlong interview with The New York Times, the chair, Robyn Denholm, said Mr. Musk was capable of delivering world-changing technology if driven by seemingly impossible goals.

“Putting together any compensation plan, you need to look at what motivates the individual that you’re trying to motivate,” Ms. Denholm said at Tesla’s engineering headquarters in Palo Alto, Calif. “And for Elon, it’s doing things that no one else has done before.”

Ms. Denholm, who has given few interviews in her 11 years on the Tesla board, has become the main spokeswoman for a campaign to convince the company’s investors that Mr. Musk should be given shares that would be worth almost $1 trillion if he achieved a series of moonshot objectives. Shareholders will vote on the package at an annual meeting in November.

In effect, Tesla’s board is arguing that Mr. Musk is a unique human being who responds only to otherworldly challenges matched by otherworldly compensation. In the filing, the board said benchmarking Mr. Musk’s pay package against the compensation of other executives, as is customary, would be irrelevant.

Ms. Denholm, occasionally appearing ill at ease, referred to Mr. Musk’s “unique characteristics, including his track record of being able to deliver against wildly ambitious plans.”

Tesla’s shareholders have great ardor for Mr. Musk, but even this may be a tough sell. Ms. Denholm is contending that Mr. Musk deserves this compensation package even after Tesla’s car sales have slumped on his watch, its profit has fallen and one of his pet projects, the Cybertruck pickup, has been a flop.

Some investors are angry. “Offering Elon Musk — the richest man in the world — a trillion-dollar pay package to convince him to remain C.E.O. at a company he has already badly damaged is unconscionable,” Laura Montoya, the New Mexico state treasurer, said in a statement. New Mexico and other states own Tesla shares in their employee pension funds.

For Mr. Musk to collect shares that would ultimately equal 12 percent of the company, Tesla would have to deploy one million autonomous taxis and one million robots and increase profit more than 24-fold from last year. It would also have to increase its stock market value to $8.5 trillion from about $1 trillion.

But the car sales milestones in what Ms. Denholm prefers to call a performance plan do not seem that difficult to achieve. Tesla would need to sell an average of 1.2 million vehicles a year through 2035 for Mr. Musk to meet his goals, far fewer than the 1.8 million sold last year.

After pioneering the market for electric vehicles, Tesla risks becoming a minor player. It has already fallen behind the Chinese automakers BYD and Geely and could soon fall behind Volkswagen.

Ms. Denholm disputed suggestions that vehicles are no longer the most important business for Tesla, which also sells large batteries used to store renewable energy. “There is still a lot of ambition in the vehicle space,” she said, though she declined to discuss future products in detail.

Mr. Musk has appeared content to let the car business stagnate. Instead, he has described a future of “sustainable abundance” where people ride in self-driving Tesla taxis and Tesla humanoid robots act as personal servants and factory workers. Tesla’s board fully supports Mr. Musk’s strategy, Ms. Denholm said.

“It really is using technology to create a world where anything is able to be produced, goods and services are able to be produced in abundance,” she said.

The public fixation on the eye-popping value of the package is misplaced, Mr. Denholm said. Mr. Musk would have to remain at Tesla for at least seven and a half years to cash in any of the shares he received. But he would be able to immediately exercise the votes they represented. The votes, more than the wealth, are what interest Mr. Musk, she said.

“It’s actually about the voting influence in the company for the next generation of growth that he sees,” she said. “I think it’s a little bit weird talking about the dollars when it’s actually the voting influence.”

A former telecommunications executive who is Australian, Ms. Denholm has earned hundreds of millions of dollars from her work on the board, enough to buy two professional basketball teams in Sydney, one women’s and one men’s. She and other board members have often faced criticism that their compensation, which far exceeds what is typical in the corporate world, has made it hard for them to stand up to Mr. Musk.

The special committee that arrived at the compensation plan consisted of Ms. Denholm and Kathleen Wilson-Thompson, a former chief human resources officer for the Walgreens Boots Alliance. Otherwise, the board consists primarily of friends and longstanding business associates of Mr. Musk and his brother, Kimbal.

The board is not captive to Mr. Musk’s whims, Ms. Denholm insisted. “The board is a great board, very active, very independent, and I think the outside world doesn’t appreciate it,” she said.

The special committee operated under the shadow of a Delaware court ruling, which Tesla has appealed, that found Mr. Musk had largely dictated the terms of a 2018 compensation package to the board. The previous plan helped make Mr. Musk the world’s richest person, but the new plan dwarfs it.

Ms. Denholm and Ms. Wilson-Thompson held 10 meetings with Mr. Musk to discuss his compensation. Ms. Denholm insisted that there was genuine give and take despite Mr. Musk's threat, repeated several times publicly, that he would devote his time to other pursuits if he did not get enough shares to increase his current 13 percent stake to at least 25 percent. She declined to provide examples of concessions that Mr. Musk might have made.

The board has not placed any restrictions on Mr. Musk’s political activities, which included several months at President Trump’s side and outspoken support for right-wing politicians around the world. His views have offended many liberals, some of whom have sold their Teslas as a result.

“There’s no restriction on his free speech or his political views,” Ms. Denholm said. She declined to directly address a question about whether Mr. Musk had damaged Tesla’s reputation, saying, “The plan is about the future of the company and Elon’s role in that in terms of leading the company to produce fabulous products and deliver for shareholders.”

Even investors not concerned about Mr. Musk’s political leanings worried that his political activities had distracted him from running Tesla. Ms. Denholm said that, for security reasons, the board had asked Mr. Musk not to travel a lot while he worked for the Trump administration. That was why he spent so much time in Washington, she said.

“I’m not concerned about him not spending enough time or energy at Tesla,” Ms. Denholm said, “and I never have been.”