Tesla board pitches unprecedented $1 trillion pay deal to retain Elon Musk

The Tesla board has proposed a new 10-year compensation plan for CEO Elon Musk that could be worth a staggering $1 trillion, contingent on the company reaching a series of "extraordinary" performance goals. The deal, which would be the largest in corporate history if approved, is designed to keep Musk at the helm as the company shifts its focus from electric vehicles to artificial intelligence, robotics, and robotaxis.

The proposal, which will be put to a shareholder vote in November, comes after a Delaware court invalidated Musk's previous $56 billion compensation package in January 2024.

Tesla's board and a special committee of independent directors spent seven months crafting the new plan, which they described as "A Super Ambitious Incentive Package for a Pioneering, Ambitious and Unique CEO".

The ambitious goals and potential payout

The new pay package, known as the 2025 CEO Performance Award, would grant Musk a new batch of Tesla shares, which would vest in 12 tranches. The full value of the deal, which could make Musk the world's first trillionaire, would only materialize if he achieves an array of highly ambitious targets:

Market capitalization: Tesla's market cap must increase from its current value of about $1 trillion to $8.5 trillion. The first tranche would vest when the company's valuation reaches and sustains $2 trillion, with additional tranches tied to every $500 billion increment after that.

Operational milestones: Musk must also meet a series of operational goals, including delivering 20 million vehicles annually, launching 1 million autonomous robotaxis into commercial service, and producing 1 million humanoid robots.

• Financial targets: The company must also reach an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $400 billion.

• Commitment: To earn the full amount, Musk must remain with the company for at least 10 years, with the first tranches vesting after 7.5 years.

If Musk meets all the hurdles, his ownership stake in Tesla could more than double, from about 12% to over 25%, consolidating his control over the company.

In a separate but related proposal, the board is also calling for a nonbinding shareholder vote on a strategic investment in Musk's xAI startup.

A high-stakes bet

Analysts, like Wedbush's Dan Ives, view the package as "critical to keep Musk at the helm" through the company's next phase of growth. The board's special committee stated that "retaining and incentivizing Elon is fundamental to Tesla achieving these goals".

However, the proposal has also drawn criticism from those who argue it is excessive and sets a dangerous precedent for corporate governance.

The vote on November 6 will ask shareholders to decide how much turbulence they are willing to tolerate in exchange for potential growth, as Musk juggles leadership of Tesla with his other ventures, including SpaceX, X, and the Boring Company.