Elon Musk’s 2025 equity-only compensation package—approved by more than 75% of Tesla shareholders in Texas and valued at up to USD1 trillion—has reignited global debate over the boundaries of executive pay.[1] Structured as 12 milestone-based tranches with zero salary or cash bonus, the award represents an extreme form of high-alignment remuneration: it has no value until and unless Musk drives Tesla to achieve ambitious market capitalisation and operational targets.[2]
Beyond the headlines, the “Musk Model” illustrates fully contingent, performance-linked incentives. Importantly, this is not a broad-based scheme, but a bespoke contractual allotment tailored to a specific individual.[3] The key question is whether a package of this nature can be implemented within Malaysia’s statutory and regulatory framework.
Under the Companies Act 2016 (“CA 2016”), any Malaysian company seeking to implement such an award must satisfy the three pillars: remuneration approval,[4] authority to allot,[5] and shareholder protection.[6] While these legal gates apply uniformly, the procedural requirements—and preliminary considerations such as voting rights and dilution limits—diverge significantly depending on whether the company is a public listed company or a private limited company.
This article, Part 1 of a two-part series, focuses on the framework for public listed companies on Bursa Malaysia’s Main Market.
Public Listed Companies on the Main Market
For a company listed on Bursa Malaysia’s Main Market, the CA 2016 framework is overlaid by the Main Market Listing Requirements (“MMLR”), which sets two defining redlines that boards should carefully consider when structuring such awards:
1. Voting neutralisation
- • Texas: Interested directors and their affiliates are not prohibited from voting at the board level or their own shares.[7] While Elon and his brother, Kimbal Musk, recused themselves from the Tesla board vote,[8] they remained free to exercise, and did exercise, their voting rights as shareholders to approve the award to Elon.[9]
- • In Malaysia: This potential “thumb on the scale” is removed through a dual-level prohibition. Section 222(1) of the CA 2016 bars interested directors from board deliberation and voting, while Paragraphs 6.06(1)-(2) and 7.25 of the MMLR bar interested directors, major shareholders, chief executives, and persons connected to them from the shareholder vote on the award. In both instances, approval rests entirely with disinterested parties.
- Dilution scrutiny
- • In Texas: Dilution limits are driven by shareholder appetite rather than legal limits. By approving award to Elon, Tesla shareholders accepted up to 12% dilution of their ownership as a justifiable trade-off.
- • In Malaysia: Unlike share issuance schemes that carry pre-defined 10-15% caps,[10] a bespoke package has no fixed ceiling but is constrained by the public spread requirement under Paragraph 8.02(1) of the MMLR. This mandates that at least 25% of total listed shares (excluding treasury shares) remain in public hands, unless Bursa Malaysia approves a lower threshold for companies.
Procedural Trajectory: A 4-Step Cycle
To execute a Musk-style allotment to an interested director, a Main Market issuer must navigate rigid sequence of public accountability, as summarised below:
1. The specific allotment must first be approved by the board (excluding the interested director from all deliberations and voting) as a formal proposal to shareholders and the listed issuer must make an immediate announcement to Bursa Malaysia following the approval.[11] Pursuant to Paragraph 6.07(1) of the MMLR, this announcement must include the information set out in Part A of Appendix 6A. By approving this proposal, the board effectively assumes fiduciary responsibility under Section 213 of the CA 2016 and must be prepared to justify the grant as a good faith act in the best interest of the company well before it reaches a shareholder vote.
2. The listed issuer must next prepare a formal circular to shareholders in accordance with Paragraph 6.08(1) of the MMLR, detailing information set out in Part A of Appendix 6B. Specifically, the circular must include a board statement on whether the allotment is in the lister issuer’s best interests, its voting recommendation with the underlying basis, and any dissenting director’s individual statement of reasons.[12]
Paragraph 9.33 of the MMLR mandates that the draft circular must be submitted to Bursa Malaysia for vetting within 2 months from the announcement (or the last necessary regulatory approval, whichever is later) before issuance and the final circular must be dispatched within 14 market days of clearance by Bursa Malaysia (or the last necessary regulatory approval, whichever is later).[13] In practice, the circular typically accompanies the notice of meeting under Section 316(2) of the CA 2016, adhering to a statutory lead time of at least 14 or 21 days for an ordinary or special shareholders’ meeting respectively, and functions as an explanatory note to ensure an informed vote.[14]
3. This culminates in a general meeting,[15] whether ordinary or special, where the proposal must clear three legal gates, each requiring shareholder approval via a separate and independent ordinary resolution. First, the remuneration for such interested director must be approved according to Section 230(1) of the CA 2016. Second, the board must be granted the specific authority to allot and issue the new shares under Section 75 of the CA 2016. Third, the listed issuer must obtain a ‘direction to the contrary’ to expressly waive the existing shareholders’ pre-emptive rights to the new allotment.[16] While Section 85 of the CA 2016 allows for constitutional modification of these rights, this pre-emptive protection is made mandatory for listed issuers by Paragraph 7.08 of the MMLR, effectively displacing any constitutional silence or modification and requiring an express shareholder waiver as such.
4. The process is validated by a clean vote requirement under Paragraph 6.06(1) and (2) of the MMLR. This mandate bars not only the direct beneficiary (interested director) but all interested directors, major shareholders, chief executives and persons connected with them (e.g., spouse or relatives of the said interested director), if any, from voting on these resolutions, leaving the final decision exclusively to disinterested shareholders.
Conclusion
As a bespoke performance-linked reward, the “Musk model” represents a departure from conventional executive compensation, where fixed salaries and standard bonuses dominate. For a Main Market issuer, however, executing such an equity award is not merely a matter of setting performance targets but requires careful navigation of compliance requirements. This intricate process—from board recusal and dilution requirements to Bursa Malaysia vetting and clean vote mandate—highlights the balance the boards of public listed companies must strike between incentivising visionary leadership and fulfilling their broader fiduciary, statutory and regulatory obligations.
In Part 2 of this two-part series, we will examine private limited companies that are not subsidiaries of public listed companies, exploring the procedural flexibility and governance considerations necessary to implement a Musk-style compensation package outside the Main Market framework.
[1] United States Securities and Exchange Commission (“U.S. SEC Edgar”), Tesla Inc.’s Form 8-K dated 6 November 2025
[2] Ibid.
[3] Ibid; Tesla Inc. 2025 CEO Performance Award Agreement dated 3 September 2025
[4] Section 230 of CA 2016
[5] Section 75 of CA 2016
[6] Section 85 of CA 2016
[7] Section 21.418 of Texas Business Organizations Code
[8] NBC News, ‘Tesla shareholders approve $1 trillion pay package for Elon Musk’ (7 November 2025)
[9] U.S. SEC Edgar, Tesla Inc.’s Form 8-K dated 6 November 2025; CNBC, ‘Tesla investor support for Elon Musk’s massive pay plan was lower in 2025 than in 2018’ (10 November 2025)
[10] Paragraphs 6.37(3)(b) and 6.38(1) of MMLR
[11] Paragraph 2.1(a) of Practice Note 28 of MMLR
[12] Paragraph 30 and 31 of Part A, Appendix 6B under Chapter 6 of MMLR
[13] Paragraph 2.1(b)-(c) of Practice Note 28 of MMLR
[14] Paragraph 7.15 and 8.27 of MMLR
[15] Section 230(1) of CA 2016; Paragraphs 6.06(1)-(3) of MMLR
[16] Dato’ Azizan Abd Rahman & Ors v Concrete Parade Sdn. Bhd. & Ors and other appeals [2024] 3 MLJ 223 (FC)
About the authors
Shaun Lee Zhen Wei
Principal Associate
Corporate & Investor Services
Halim Hong & Quek
shaun.lee@hhq.com.my
.
Sherzanne Lee
Senior Associate
Corporate & Investor Services
Halim Hong & Quek
sz.lee@hhq.com.my
.
Carmen Lee Kar Mun
Associate
Corporate & Investor Services
Halim Hong & Quek
carmen.lee@hhq.com.my
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