Despite the headlines, Elon Musk may never make a trillion dollars. The Tesla CEO will receive this huge sum only if he has to meet incredibly ambitious goals, which include increasing the company’s stock value to $8.5 trillion, selling 20 million vehicles and one million robots. It sounds like something like science fiction, and maybe it is. But the fact that Tesla shareholders see fit to reward this approach should make us reevaluate the place of shareholder capitalism in our economy, because it has shown itself incapable of dealing with two critical problems: irrational exuberance and inequality.
Speculation and inequality
Many analysts have pointed to Tesla’s stock being overvalued with a high price-to-earnings ratio. Despite falling sales and profits after its association with the Trump campaign, its market capitalization has soared, currently standing at about $1.5 trillion. Why, then, is Musk being rewarded when his company’s real-world performance doesn’t match the stratospheric rise in its financial value?
The current pay package voted on by Tesla’s shareholders is a pure bet for the future, that the company will eventually be able to transform itself into an Artificial Intelligence-giant under Musk’s leadership. But there is little to support the claim at present, and validation of Musk’s exorbitant pay package is a speculative bet on his ability to deliver record profits in the future. This is completely irrational exuberance, a gamble played under deep uncertainty about the future, the same irrational exuberance that saw economies destroyed in 1929 and 2008.
As Keynes himself pointed out, there can only be harm with a system that makes economic activity a byproduct of speculation. However, let’s assume that the gamble succeeds. Shareholders’ enthusiasm may prove rational, but it will only increase inequality. Under the deal, if Tesla were to achieve an $8 trillion valuation, Musk would be given additional Tesla stock, bringing the value of his total holdings to more than a trillion dollars – a massive increase in wealth inequality concentrated under the power of one person. The institution created to curtail the worst excesses of individual entrepreneurs by spreading power among many shareholders has shown itself decidedly unfit for the task.
They are guilty of either perpetuating an inflated view of the company’s prospects, or of legitimizing levels of wealth concentration unheard of in history and, by extension, undermining the foundations of democracy.
Voting rights and principles
Voting rights given to shareholders is, in principle, a useful mechanism. If workers owned shares in a modern corporation, the losses they would suffer from slow wage growth could, in theory, be offset by increases in equity holdings. Furthermore, dissemination of voting rights will ensure checks and balances on the CEO’s exercise of power. The Tesla vote has shown the limits of these arguments.
One could argue that the trillion-dollar payout is a reward for Musk increasing shareholder wealth. This fits with a world-view that views inequality as justified if it leads to an increase in living standards without causing market distortions such as strong-armed competitors or deceiving consumers. But this is to take too narrow a view of the political import of inequality.
Given the narrow limits of the process set by the company, the voting process at Tesla may be legitimate, but it is inappropriate given the fact that Elon Musk has interfered in elections, publicly made a gesture that has been interpreted as a Nazi salute and amplified hateful right-wing content on social media platforms he owns.
The procedural nature of voting is necessary, but not sufficient, for the preservation of economic democracy. For example, a simple account of democracy assumes that organs of freedom of expression should not be monopolized. Yet this is exactly what X (Twitter) shareholders voted to do when they agreed to its sale.
Imagine that all Tesla employees could vote on executive compensation, but not on working conditions. Furthermore, imagine that Musk offers a credible plan to increase stock values, and at the same time significantly increase his own net worth. Voting for the plan increases workers’ net worth, but increases the possibility of further election interference. According to the narrow range of economic rationality, it would be rational for individuals to vote for the plan. For shareholder capitalism to truly maintain democratic norms, voters would have to be economically irrational in valuing political objectives over their narrow economic interests.
effect of wealth growth
One could criticize this argument by claiming that this author is incorrectly mixing political and economic objectives, which shareholder capitalism was never meant to deal with. But uncontrolled wealth accumulation over the past few decades has meant a blurring of the boundaries separating the political and the economic. Rising wealth inequality, even with increasing individual wealth, is weakening political institutions.
The sale of the X and Tesla’s pay packages have shown that simple access to equity shares and the act of voting alone cannot meaningfully stop the worst excesses of modern capitalism. What is needed is to incorporate these processes into broader democratic institutions that clearly limit the concentration of wealth and its ability to interfere with democratic processes. Keynes realized this paradox: capitalism can only work meaningfully if its governance is reduced. It is beyond time and we recognize it too.
Rahul Menon teaches at the Jindal School of Government and Public Policy at OP Jindal Global University
published – January 02, 2026 12:08 am IST
