Inside Elon Musk’s $1 Trillion Tesla Payday — And Why It’s a Governance Nightmare

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1:25That's what Crucible Moments is all about. Hosted by Sequoia Capital's managing partner, Rolov Botte, Crucible Moments is returning for a brand new season. And they're kicking things off with episodes on ZipLine and Bolt, two companies with surprising paths to success. Crucible Moments is out now and available everywhere you get your podcasts and at cruciblemoments.com. Listen to Crucible Moments today. Today's number, one trillion. That's how many dollars worth of stock Elon Musk could receive in his new compensation package. That is more than the GDPs of Croatia, Greece, Portugal, and Finland combined.

2:08Or, as the board puts it, enough to show up to the office. Money market's mad. If money is evil, then that building is hell. The show goes on! The folks in there are questions. Show, show! Welcome to Prof G Markets. I'm Ed Elson. It is November 11th. Let's check in on yesterday's market vitals. The major indices climbed as the Senate advanced a plan to end the shutdown. The S &P 500 and Nasdaq rallied the most since May. Palantir jumped 9%, recovering from last week's sell-off. Meanwhile, Bitcoin rose alongside stocks and gold hit a two-week high. Okay, what else is happening? Paramount reported its first earnings since the Skydance merger, and it was a bit of a mixed bag.

2:56The company missed third quarter revenue expectations and announced plans to lay off 1 ,600 employees. That is in addition to the 1 ,000 job cuts that were announced last month. The company also posted a net loss of$257 million, but guidance for 2026 came in strong and projected cost savings from the Skydance deal jumped from$2 billion to$3 billion. The stock popped as much as 8 % in after-hours trading. Okay, here to help us break down these earnings, we are speaking with Jason Bazinet, Managing Director of Media and Entertainment Research at Citigroup. Jason, thanks for joining us. Happy to do it.

3:37Good to see you. So, Paramount reported earnings, their first since the Skydance merger. Slight miss on revenue. Stock is up around 7%, 8%. Let's just start with, take us through the earnings. What did we learn from these earnings? Well, I would say, I mean, the most important thing is this is the first time the new management team has really communicated with the street. So I think what investors were really looking for beyond the numbers was just sort of, you know, what direction are they going to take this company? What's different from the way the old management team was managing it? And I think the message was pretty clear.

4:11They plan to invest a lot in their DTC business, direct-to-consumer, so much that the firm might burn free cash flow in the near term. But the idea is to get to a point where the DTC business does generate profits. And so I sort of think of this as a race. They have to stand up a profitable direct-to-consumer business that runs faster than the decline in the old legacy pay-TV linear business. Yeah, I mean, I looked at the numbers and, you know, DTC growing up 17%, TV media down around 12%. I found myself finding the numbers kind of irrelevant because all I can think about is this new CEO and his plans for this company.

4:58I'm just wondering, do you feel the same way? I mean, are the numbers less important than the vision for the company and what he said about the plans for the company? Yeah, I think the quarterly numbers, you know, I wouldn't characterize as particularly important. You know, the guidance for next year, I would say, is a bit more important. You know, the vision, I would say, is interesting, but I would not say that it's particularly novel. I mean, I think everybody on Wall Street understands you need to invest more in DTC. The question will be, how quickly does the legacy business collapse? That's the threshold question.

5:36And what makes this a particularly perilous moment for any company trying to make this transition is in August of this year, Disney and Fox both launched sports -centric apps. And so the world that we're in now is totally different from the world that we lived in since cord cutting began in 2017. Meaning with the launch of those two apps for the first time, if you are a sports fan, you can get all the sports you want without a pay TV subscription. And so that's probably going to accelerate the rate of cord cutting. And so the fuse has been lit, but I think that the fuse is going to burn a little bit faster with these adjustments that have been made by some of Paramount's competitors.

6:23One thing that at least my co-host Scott has been saying that he thinks will happen with Paramount is it'll just be an AI free-for-all. They'll just bring in as much AI as possible, try to lay a bunch of people off, cut costs more than anyone and faster than anyone. Is that the vibe that you get listening to David Ellison talk about the future of the company? Is this going to be an AI-powered media property, or is it going to be something else? Well, they've certainly laid out ambitious cost-cutting targets, and they raised them today to about$3 billion. But, you know, there are quite a few protections that Hollywood has put in place to protect actors and writers from a full onslaught of AI.

7:10And so I think this is a bit of a balancing act, meaning any executive can't alienate Hollywood by sort of fully embracing AI. So I think they're going to use AI, but it's probably in ways that are invisible to the consumer. These are going to be more things like automating contracts, automating post-production stuff. But don't think of an AI-generated actress or actor or an AI-generated script sort of ruling the day here. The big question, or at least my big question, is what's going to happen with Warner Brothers Discovery. As many people know, Paramount has been trying to buy Warner Brothers Discovery.

7:54They made three bids, all of which were turned down. Did we learn anything new in regards to this potential acquisition? We did not learn anything new. What I would say is that Warner Brothers has said they're going to come out with a decision in December. And so we probably won't know anything for another month or so. um the way we we've looked at this is it is a function of how um strategic warner brothers is to a company um and through that lens i think it's very important for a company like paramount to get scale probably more important for paramount than anyone else and so i'd still put them in the pole position but we're gonna have to wait another month before we see if if they walk away with the asset yeah last time we spoke about this you said something that i thought was fascinating which is this only really makes sense for paramount and at the time i was kind of thinking well there are all these reports that maybe netflix is interested maybe comcast is interested we're seeing rumors about that now um but you made the point that it doesn't really make sense for any of them which has led me to believe that this is all kind of david zasloff trying to generate heat to create an auction and create some bidding.

9:12I just want to get your views on that thesis, that actually there's only really one buyer in Paramount, and that maybe this isn't much of an auction. Well, I would characterize it as nice to have for any of the other players, because, you know, Comcast has its broadband business, you know, Netflix is doing just fine on its own. um you know i'm not sure i can say this paramount's odds of succeeding in the direct-to-consumer business i think go up significantly if they can get the scale i mean that's what they talked about on today's call about getting more scale ramping up spending that is the unlock to create value in the direct-to-consumer business so i wouldn't put zero likelihood that someone else walks away with it i would just say it is a strategic imperative for paramount and paramount alone okay if we're making bets, what would you bet happens to Warner Brothers Discovery, say, 12 months from now?

10:08Yeah, I mean, we've said it's a 60 % likelihood that it gets sold to Paramount, a 15 % likelihood that Comcast emerges as the winner, and maybe 5 % that it's Netflix. And the reason we put those chunky odds is I don't, I just think, I just always go back to this very simple notion. If you look at the market cap of Paramount today, you know, it is a fraction of what Netflix's market cap is. And so if you're the Ellisons, you have to think, you know, how much value could I create if I could really take this on? And how are you going to succeed doing that? You're going to need more content scale.

10:42And the only asset that really offers that is Warner Brothers. All right. Jason Bazinet, Managing Director of Media and Entertainment Research at Citigroup. Jason, always good to hear your perspective. Thank you for your time. Absolutely. Thank you. After the break, a look at Elon's$1 trillion pay package. If you're enjoying the show, give Profit G Markets a follow.

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14:13We're back with Prof G Markets. Tesla shareholders have approved the largest pay package in corporate history. Elon Musk's$1 trillion compensation plan passed with more than 75 % of the votes at last week's annual shareholder meeting. Still, the payout depends on Tesla achieving some pretty lofty goals over the next 10 years, including a market cap of$8.5 trillion and production milestones of 20 million cars, 1 million robo-taxis, and 1 million humanoid robots deployed. So far, Tesla has delivered about 8.5 million vehicles and estimated 150 robo-taxis at most, and also zero robots. So here to help us break down what this pay package means for Tesla shareholders.

14:58We are speaking with my uncle, Charles Elson. Charles is the founding director of the Weinberg Center for Corporate Governance at the University of Delaware. And if you've listened to the show before, you know he is a leading expert in corporate governance. So, Charles, Uncle Charles, thank you very much for joining us again on Prof. G. Market. Well, it's been great being with a leading journalist like Ed Elson. Exactly. This is what we call the family reunion. There you go. It's in the genes. So we want to get your reactions to this new package. We'll just start very broad. What's in it? What does Elon have to do to get that$1 trillion?

15:43And how did we arrive at$1 trillion as a number? That's what he wanted and what the man wanted, the man got. You know, a trillion just sounds like a big number to a big industrialist like Elon Musk, I guess, or tech guy. It's going to be awarded if he hits certain targets over a several-year period. It's all in stock. And it's a big number. I mean, a trillion dollars is more than the market capitalization of most U.S. companies. The whole thing is very bizarre to me in that The question is, is that really what's needed to incent an executive? You're giving him basically 10, 15 more percent of the company, which is huge.

16:32And is he really responsible for that kind of growth? And should you give him that much of the company for achieving it? It's a bizarre sum. I guess he says, I don't need the money. Well, if that's true, why are you asking for it? And, you know, it gives him complete control. And basically, there's no accountability there. This is a board that was criticized and called non-independent by the judge in Delaware. And I don't disagree with her. To give a package like that, to accede to a package like that, even if you went through certain hoops to get there, is still out of the bounds of reason. To me, it's almost irrational.

17:17Now, the shareholders disagreed. A lot of the institutional shareholders did not agree with it, but I think there's sort of a cult surrounding him amongst the shareholding base, and he can do no wrong. But, you know, there's an old fable about the king has no clothes. And at some point, you're going to say, is this really what it's about? I mean, think about it this way. He had a bad year. His company had a bad year. He was gone. He injected himself into the political situation that created a lot of bad will for the company. itself, a lot of problems. And any other CEO, first of all, you would never let him take a year off or whatever to work for the government in this way.

17:58And you certainly wouldn't reward him for, I think, the problems that his absence caused the company. And giving him a trillion dollar incentive is almost a reward for behavior that no other board would ever, in my view, countenance. The danger to it is that once you do that, others are going to copy this. They're going to say, well, if he's so smart, so am I. I want a billion dollars. And it really skews the system. Just going back to how the shareholders voted. So it was pretty comfortably approved. 75 % of the votes. As you say, there was some big pension fund. I mean, CalPERS said no. the Norwegian Sovereign Wealth Fund, they said no.

18:42But overwhelmingly, the shareholders said, yes, I just want to get your views on what do you make of how the shareholders voted on this package? What does that say about the company? How accurate is that 75 % number in terms of how investors really feel about the company? What do you make of how they voted? Well, you know, that's about the same percentage that approved the last package, right? And the package before that. It's somewhere around there. Look, when you get a say on pay vote from your shareholders, it ought to be around 98%, anywhere in the very high 90s, because everyone should basically agree this person's worth it.

19:2125 % saying no is a pretty big number, and particularly given who they were. These are large institutions, and they're pretty sophisticated in value of the company. My concern is by doing this, you basically strip any accountability he has. And at some point it's going to cause problems for the company. Remember the, a lot of the value of this stock is in the AI potential for the company. And a lot of people invested thinking, oh, this is going to be into AI. But what he did is he created a separate company that he said, unless you, you know, unless you pay me so much, I will go to the separate company, leave you, and I'll take all the A profits, AI profits for me.

20:03And he said, but if you approve this, I'll let you have in on this. So you, A, the grand stock grant you're giving him dilutes the Dickens out of everybody else. And more importantly, they're being diluted in their return on the AI because they're going to be investing in another company that he's running. And how do you know the same thing won't happen there without accountability? That's the real danger of this thing. And others will copycat the thing. But remember, the shareholders voted for him because he said, if you don't, I'll leave. That's interesting, too. What do you really have left with 10 percent of the company still holding it?

20:42Does that make any sense? That's not in his economic interest. You mentioned that he said before, I don't need the money, which is probably true. He's worth half a trillion dollars already. What is this about then? Is this purely about control and having more power at the company? Is this really about incentives? I mean, if he doesn't need the money, why do this? What is the point? Well, you know, he's a big personality and he obviously is very self-confident. And it seems as though he wants greater control. He doesn't like to be questioned. He doesn't like to be critiqued. And that's what came out of this whole trial.

21:22He was critiqued by the judge and he attacked the judge, attacked the system in Delaware, and picked up and moved to Texas where such suits basically are impossible. Under the regime he's now in, he can do basically what he wishes without any sort of judicial challenge, certainly, as it's going to be impossible to bring a suit with the new rules on who can bring a suit in Texas. And, you know, he probably has a very favorable judiciary there, obviously, you know, move there for a particular reason. And there goes accountability. And when someone is no longer accountable, that's where problems develop.

22:00The greatest collapses I've seen in history are when people stop thinking of themselves as accountable and begin thinking of themselves as flawless because there's no one to say no. And this board hasn't before, and I would seriously doubt ever will. We talked last time about the importance of the company moving out of Delaware or reincorporating into Texas. How will that play out in this compensation plan? Did that play a part in how this all played out? What does that mean for Elon and for Tesla? It means it's going to be impossible to bring a derivative suit against the compensation. As in Delaware, anyone could.

22:43Small shareholder, large shareholder. Here, you have to have at least 3 % of the company to bring in action. And they're just practically nobody has those kinds of holdings, meaning it's not challengeable legally. That's the end of the story. It means that, you know, look, whether he won this vote or lost this vote, I am confident that one way or another, the board would have found a way to make him happy. And that's really, frankly, not the greatest way, in my view, to run a large public company. Look, if it was his own company, if he owned it all, then he'd do whatever he wishes with it. But he took on public shareholders.

23:22And once you take on public investors, the stakes change. It's a different story. You have to be accountable to them. You ask for their money. You can't take their money and then say goodbye, see you in another century. That's accountability to your investors. And you can't function as though you're a private company in this setting, which is if it's a private company, it's your money that's at risk. No one else's. Now you've got other people's money. And that's the real problem. That was the whole problem with the AI thing, because he owed a duty to the company itself that he was working for the company.

23:58He was to be loyal to the company, but threatening to set up a competing venture in AI. That just is something in an ordinary company. There would be significant objections to, certainly by the board. And, you know, he probably in a normal situation wouldn't be there. The question is, is anybody that good? And even if they were, do you give into every one of their demands? Because anytime you give into a demand, the next one is going to be larger. And that's what we've seen here. The one before was 300 million, you know, 300 million. Now you got a trillion. It's almost, it's... And we're all complaining about that.

24:36It's laughable in some respects because you wonder, are we in tulip bulb territory again? You know, the tulip bulb was one of the four. It was just a tulip bulb. Yes. It's a car company. Before you go here, as a corporate governance expert, as someone who has studied, you know, thousands of compensation packages, you've written about this before. When we look back in history, when the textbook on corporate governance is written in, call it, 2070, and professors are talking about what happened, how will this go down in history? What will people say from a corporate governance perspective about this package and about Elon and Tesla at large?

25:21I have a feeling in the end people are going to regret this. I don't know how the company will perform, but, you know, I think in the end, people say this was wrong. You shouldn't give someone that much control over a company or that much of a stake in a company simply for certain returns. What was the incentive of giving him that package then when he already had so much of it? There's no incentive here. It's a demand and it smells like a gift to a lot of folks, I think. And that's the problem. And you can't give resources away like that, I think. Not fair to the others. Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware.

25:59Charles, always great to speak with you. Thank you. As well, nephew Ed. Nephew Ed. I love it. My new epithet. Thanks, Charles. So, a big headline and a big number. $1 trillion. Now, will Elon Musk actually get$1 trillion? Probably not. To get it, he would need to ship a million robotaxis. He'd need to sell 10 million self-driving subscriptions. He'd need to reach a market cap of$8.5 trillion all in the next 10 years. Anything is possible, but this is honestly not likely at all. And by the way, the board certainly knows that, which is why they are down to offer him such a ridiculous number. They know how ridiculous the premise is.