Tesla shareholders have greenlit an ambitious compensation package for CEO Elon Musk, potentially awarding him more than $1 trillion over ten years should he meet all targets set in the plan. At the recent shareholder meeting, Musk secured more than 75% of the voting shares to approve the package.
The compensation plan allots Musk 423,743,904 Tesla shares, distributed in 12 blocks of 35,311,992 shares each, contingent on Tesla achieving specific operational and market value milestones. Objectives include the delivery of 20 million vehicles, securing 10 million Full Self-Driving subscriptions, manufacturing 1 million AI robots, deploying 1 million robotaxis, and achieving a $400 billion adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization).
Musk has implied he might depart Tesla if not granted a larger share of the company. Addressing investors last month, he remarked, “It’s not like I’m going to go spend the money. It’s just, if we build this robot army, do I have at least a strong influence over that robot army? Not control, but a strong influence. That’s what it comes down to in a nutshell. I don’t feel comfortable building that robot army if I don’t have at least a strong influence.”
The plan comprises 12 market capitalization milestones, culminating at an $8.5 trillion valuation. Should all operational and valuation goals be realized, the package’s worth would exceed $1 trillion. Following this, Musk’s ownership stake in Tesla is set to rise to 24.8%, or potentially 28.8% if an ongoing court case appeal related to his 2018 pay plan is successful.
Tesla Chair Robyn Denholm has advocated that generous pay packages are essential to keep Musk motivated. Nonetheless, some investors argue that $1 trillion is an excessive amount for a CEO who also leads other enterprises like SpaceX, X (formerly Twitter), and xAI.
New York Comptroller Thomas DiNapoli, who manages a state retirement fund owning over 3.3 million Tesla shares, recently criticized the compensation plan during a webinar. He stated that Musk’s existing stake in Tesla should already offer sufficient motivation. “The idea that another massive equity award will somehow refocus a man who is hopelessly distracted is both illogical and contrary to the evidence. This is not pay for performance; this is pay for unchecked power.”
Amidst concerns over Musk’s focus, given his involvement in xAI, some significant Tesla investors have discreetly communicated concerns to top executives and board members about Musk’s attentiveness to Tesla and whether a CEO succession plan exists. According to a Wall Street Journal article, a notable number of Tesla board members, including chair Robyn Denholm, former Chipotle CFO Jack Hartung, and Tesla co-founder JB Straubel, recently convened with major investors in New York to advocate for Musk’s proposed new pay package.