When Pay Undermines Purpose: Lessons from Tesla Through a Good to Great Lens

By Kristin Hull, Founder & CIO, Nia Impact Capital

Note: Nia sold Tesla shares from all client portfolios over 3 years ago in March and April of 2022. We retain enough shares in a non-client portfolio to continue our work and corporate engagement. After meeting and speaking with so many employees suffering from discrimination and a difficult work environment, we will continue to use our investor voice and leverage to do all we can to advocate for best human capital management practices.

This week investors are voting on the proposed trillion-dollar compensation package for Elon Musk. This Tesla proposal is more than an unimaginably high headline-grabbing number — it’s a defining moment for investors and for corporate governance. This proposal asks shareholders -though really all of us- to consider what kind of economy we want to see and participate in: one built on shared prosperity and long-term purpose, or one increasingly driven by ego, short term valuation, and market spectacle.

At Nia Impact Capital, we invest in companies where leadership, strategy, and governance align with long-term sustainability. When we evaluate the Tesla pay package proposal through the lens of Jim Collins’ iconic Good to Great and Nia’s own investment criteria, we find deep concerns about the current leadership structure, the financial incentives, and the values shaping Tesla’s future.

1. Level 5 Leadership vs. Ego Leadership

In Good to Great, where Collins shares research on the components of the very best companies, he identifies “Level 5 Leaders” as needed for companies to excel for the long run. These CEOs blend humility with fierce professional will and strategically build organizations that endure beyond their tenure. Tesla’s trillion-dollar package rewards individual wealth and personality over institutional strength. When one leader becomes larger than the system, discipline gives way to personality-driven decision-making, and the company risks erratic governance. We have all witnessed erratic CEO behaviors at Tesla.

This structure reinforces an individual-first culture, one that depends on a single visionary rather than cultivating diversity of thought, robust management, and long-term resilience. The pay package as written signals that Tesla’s greatness depends on who is in the driver’s seat — not on the strength, creativity, and cohesion of the entire team.

2. Misaligned Incentives and Governance Risk

At Nia, we invest in companies where the CEO reports to the Board. We see the reverse happening at Tesla. We advocate for boards that tie compensation to meaningful, measurable outcomes — progress on sustainability, cultivating a culture of inclusion, innovation, and stakeholder well-being. These are all best business practices, yet Tesla’s pay plan does not accomplish any of these key drivers of success. The proposal rewards market capitalization alone — a metric easily swayed by speculation, hype, or the personality, behavior or brand of its CEO.

By prioritizing market cap over product excellence, team culture, and sustainable profitability, this pay package risks distorting Tesla’s economic engine. It pushes leadership toward short-term stock value rather than the company’s original long-term purpose: accelerating the world’s transition to sustainable energy.Today, with the CEO’s attention scattered across multiple ventures and controversies, even that purpose has grown unclear.

3. Erosion of Shared Prosperity and Institutional Strength

A pay package so concentrated on one person undervalues the collective talent that actually drives innovation and execution — the engineers, designers, and factory workers who make Tesla’s success possible. A trillion-dollar payout amplifies wealth inequality, further concentrating power at the top while eroding trust and morale across the organization.

This structure ties Tesla’s identity, valuation, and culture too closely to one individual’s persona and incentives — the opposite of building a company designed to last beyond its founder. The pay package itself mirrors what Jim Collins describes as a failure of disciplined leadership and governance: a shift from purpose and stewardship to ego and valuation.

4. The Cost to Greatness

From a Good to Great perspective, true greatness is never built on celebrity or short-term stock gains. It’s built on the quiet discipline of mission-driven people working toward a clear purpose, guided by values that endure through leadership transitions.

At Nia Impact Capital, we are voting “No” because the package is excessive, and would serve to exacerbate growing inequalities in the US. We believe this vote is about more than a single CEO’s pay. It’s about the kind of capitalism we choose to reward — one that prizes ego and excess, or one that invests in shared success, purpose-driven innovation, sustainability and long-term value creation.

Greatness that depends on one person isn’t greatness at all. It’s fragility disguised as success.

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Important Disclosure

The views presented in this blog are those of Nia Impact Advisors, LLC (“NIA”). This document is for informational purposes to illustrate Nia’s engagement and activism. This is not intended to be construed as legal, tax or investment advice.  This does not constitute an offer to sell or the solicitation of any offer to buy any security. Any mention of an individual security is for illustrative purposes only and is not to be considered a recommendation to buy or sell a security. This article does not constitute a personal recommendation or take into account the particular investment objectives, financial situation or needs of individual clients. This does not purport to contain all the information that an interested party may desire, or require, to make a fully considered investment decision. Investors should consider whether any advice or recommendation associated with this commentary is suitable for their particular circumstances and, if appropriate, seek professional tax or legal advice before making any investment decisions. There is a risk with any investment that you may lose money, including all the principal invested. Past performance is no guarantee of future returns. All third party information is obtained from sources believed to be reliable, and we do not certify the accuracy or completeness of this information. Tesla stock is not currently held in any of Nia’s four core portfolios. However to continue our engagement on these issues and our efforts to hold this company accountable, Nia continues to hold stock in the company.