Tesla’s board has proposed a groundbreaking $1 trillion pay package for CEO Elon Musk, contingent on him hitting a series of extraordinarily ambitious targets that would transform Tesla into the most valuable company in history.
The proposal, unveiled in a filing with the Securities and Exchange Commission, sets out 12 market value milestones for Musk to achieve over the next decade, starting with doubling Tesla’s capitalization to $2 trillion and culminating at $8.5 trillion. Each market milestone is paired with an operational goal, such as putting 1 million robotaxis into service, selling 1 million AI-powered humanoid robots, and increasing a key earnings metric by 24-fold. Musk would receive shares in tranches only upon reaching these benchmarks, with no salary or bonus involved.
This initiative follows a turbulent period for Musk’s compensation. A Delaware court invalidated his 2018 award of $50 billion last year, siding with shareholders who argued the targets were unfairly set. Tesla has appealed that decision, with a hearing scheduled for next month, and recently granted Musk $29 billion in shares, but the new plan aims to provide a more robust and performance-linked incentive structure.
Tesla Chair Robyn Denholm and other directors have strongly endorsed the proposal, stating that “retaining and incentivizing Elon is fundamental to Tesla achieving these goals.” They believe his leadership is critical to unlocking growth through innovation and technology advancements, and they have urged shareholders to approve the package to ensure Musk’s focused dedication.
Despite the board’s confidence, the plan has sparked skepticism and criticism. Investment analyst Dan Coatsworth described it as “beggars belief,” questioning the rationality of such a massive award when Tesla faces significant challenges, including a 40% drop in European sales earlier this year, which some attribute to Musk’s polarizing political comments and his involvement in multiple ventures beyond Tesla, such as SpaceX and X.
The package requires approval from a majority of Tesla’s shareholders. If successful, Musk’s stake in the company could rise from nearly 16% to over 25%, potentially elevating his net worth—currently estimated at around $430 billion—to more than $2 trillion, making him the first trillionaire. Shareholders would also benefit from the increased stock value if targets are met.
This proposal could set a new precedent for executive pay, raising concerns about corporate governance. Critics worry that it might encourage other companies to offer similarly inflated packages, potentially diverting resources from broader stakeholder interests. The debate highlights the tension between rewarding visionary leadership and ensuring fair compensation practices.
In conclusion, the fate of this unprecedented pay deal rests with Tesla’s investors, who must weigh the potential for monumental growth against the risks of over-reliance on Musk’s capabilities amid ongoing corporate and market pressures. The outcome will not only shape Tesla’s future but also influence norms in executive compensation across industries.