Tesla Inc. (TSLA) has submitted a proposal for a substantial long-term compensation package for its CEO, Elon Musk. The plan, detailed in a recent proxy statement, could reach approximately $1 trillion, contingent upon achieving ambitious growth targets and Musk‘s continued tenure.
The proposed award consists of 423.7 million shares, equivalent to 12% of Tesla‘s outstanding shares. These shares would be distributed in twelve installments over ten years.
To receive the full payout, Tesla‘s market capitalization must increase by $7.5 trillion from its current valuation. This would necessitate Musk remaining as CEO for at least ten years.
The company’s initial valuation of the award is $87.75 billion. However, reaching the aforementioned growth goals would exponentially increase its value. This structure incentivizes both rapid growth and long-term commitment from Musk.
The proposal’s vesting schedule is designed to retain Musk‘s leadership. Shares begin vesting on the fifth anniversary of the award’s grant date and fully vest after ten years, provided Musk maintains continuous employment.
This proposal follows a recent separate stock award to Musk valued at $29 billion. The combined value of these awards, if fully realized, would significantly increase Musk‘s stake in Tesla.
The board’s decision reflects a belief that Musk‘s continued leadership is crucial for Tesla‘s future. The company sees itself at a pivotal juncture, transitioning from a solely electric vehicle manufacturer to a broader enterprise encompassing artificial intelligence, robotics, and sustainable energy.
Analysts largely view the move favorably. One prominent Wall Street analyst noted that Musk is Tesla‘s greatest asset, especially given the burgeoning AI sector. The analyst highlighted the importance of Musk‘s continued involvement in the company’s autonomous vehicle and robotics initiatives.
The proposed payment schedule involves incremental share releases tied to specific market capitalization milestones. These milestones require sustained market cap averages over both six-month and thirty-day periods.
Beyond market cap, additional operational targets must be met. These include significant increases in vehicle deliveries, robotaxi deployment, full self-driving subscriptions, and robot production. Profitability, as measured by adjusted EBITDA, also plays a key role in determining the final payout.
Tesla is also proposing an investment in Musk‘s AI company, xAI. This investment aims to further integrate xAI‘s advancements with Tesla‘s autonomous driving and robotics efforts.
Shareholders will vote on the compensation proposal at Tesla‘s annual shareholder meeting, currently scheduled for November 6th.
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