Friday, November 7, 2025

Elon Musk’s $1 trillion pay package and the race to the bottom among states with weak corporate governance laws

In today’s CEO Daily: Geoff Colvin on Elon Musk’s $1 trillion pay package.
The big story: Long delays at U.S. airports as FAA reduces flight capacity amid shutdown.
The markets: It’s bad out there!
Plus: All the news and watercooler chat from Fortune.

Good morning. For Elon Musk, the Texas gambit seems to have worked—great news for Musk, bad news for shareholders of U.S. companies.

At Tesla’s annual meeting on Thursday, shareholders voted in favor of giving CEO Musk a gargantuan, record-shattering pay package that could give him stock worth $1 trillion after several years. It’s all upside for Musk; under the package’s rules he has nothing to lose. But the backstory of how he got there is worrisome.

Very briefly: In 2018, the Tesla board of directors gave Musk a 10-year pay package that could bring him, if he met certain financial targets over ten years, as much as $55.8 billion—a new record for CEO pay at the time. A Tesla individual shareholder sued Musk and the Tesla board for breaching their fiduciary duties. After years of litigation, a judge in Delaware, where Tesla was incorporated like most big U.S. companies, ruled against Tesla and Musk, invalidating the pay package. Other corporations began to fear that Delaware might no longer be the best place to incorporate. In response, Delaware last March passed a law to make the state more alluring, to which Texas quickly counter-punched with an even friendlier law. Key feature: Lawsuits against companies like the suit in Delaware can be initiated only by shareholders who hold at least 3% of the company’s shares. The only person with more than 3% of Tesla is Musk. This summer, Tesla left Delaware and incorporated in Texas, where the company’s board promptly offered Musk the new, eye-popping pay package.

Supporters of the pay package, which apparently received 75% of the shareholder votes at the meeting, will argue that it aligns management and shareholder interests (to get the trillion-dollar payout, Musk must meet a series of milestones, including boosting Tesla’s market cap to $8.5 trillion from its current $1.5 trillion). But what’s good for corporations and management is not always good for shareholders, and rules like the Texas 3% threshold insulate companies from accountability—they whittle away shareholder protections, such as the right for any shareholder to sue a company. And in doing so, they minimize the judiciary’s role in overseeing corporate conduct, weakening the system that has built the extraordinary U.S. economy.

The fight to attract big corporations is heating up as states hope to take away some of the incorporation fees and the business litigation that bring Delaware some $2.2 billion annually. Nevada is on its way; Dropbox and TripAdvisor are among those that have reincorporated there since last year. Oklahoma Gov. Kevin Stitt has said, “I’m trying to take down Delaware.” Competition is good. The danger is that as states vie to become corporations’ legal homes, the competition risks becoming a race to the bottom.—Geoff Colvin

Contact CEO Daily via Diane Brady at diane.brady@fortune.com

Top news

U.S. airports meltdown as shutdown goes on

Here is the list of 40 airports that wil have reduced flight capacity after today due to the federal government shutdown. Republicans have not come to a deal with Congress to end the shutdown, which looks set to continue. Long delays are already kicking in at New York-area airports. “Tomorrow is gonna be a nightmare. Tomorrow, the FAA will just shut down. Get out while you can,” one Newark Airport worker told The NY Post.

Trump expands Medicare coverage for weight-loss drugs

President Donald Trump announced agreements with pharmaceutical giants Eli Lilly and Novo Nordisk on Thursday aimed at bringing down the cost of popular weight-loss medications, including Ozempic and Wegovy. Starting in January 2026, Medicare and Medicaid beneficiaries can purchase the drugs through a new TrumpRx.gov website for around $350 per month, down from current prices ranging as high as $1,350.

Layoffs in October soared

A new report from Challenger, Gray & Christmas found that layoffs in October were up 175% from a year prior and 183% from September. “Some industries are correcting after the hiring boom of the pandemic, but this comes as AI adoption, softening consumer and corporate spending, and rising costs drive belt-tightening and hiring freezes,” Challenger’s chief revenue officer Andy Challenger wrote.

Microsoft announces new “superintelligence” team

Mustafa Suleyman, the company’s consumer AI chief, announced the formation of the new MAI Superintelligence Team on Thursday. Led by Suleyman and part of the broader Microsoft AI business, the team will work toward “humanist superintelligence (HSI),” which Suleyman defined as “incredibly advanced AI capabilities that always work for, in service of, people and humanity more generally.” Suleyman talked to Fortune about the initiative here.

Trump warms to India on oil and trade

President Trump said India “has largely stopped buying oil from Russia,” and he would like to visit the country in 2026. Washington and Delhi are renegotiating a trade deal; India currently faces 50% tariffs.

Pelosi retires and Dems begin generational civil war

Nancy Pelosi, 85, announced her retirement yesterday as a new generation of much younger Democrats bridles against the elderly cadre under former President Biden, 82, who led them to defeat in the last presidential election. Among those in the crosshairs: U.S. Rep. John Larson of Connecticut, 77; U.S. Rep. David Scott of Georgia, 80; and former House Majority Leader Steny Hoyer of Maryland, 86.