Tesla's Proposed Pay Package Could Make Elon Musk World's 1st Trillionaire

Tesla's board has proposed an unprecedented compensation plan for CEO Elon Musk that, if fully realised, could make him the world's first trillionaire. The package, announced on September 5, ties Musk's potential rewards to a series of ambitious corporate targets.

According to a report in The New York Times, Musk needs to increase Tesla's stock market value eightfold over the next decade to claim the full package. He may receive 423.7 million more Tesla shares under the plan, which are presently worth $143.5 billion.

For Musk to collect all shares, Tesla's market capitalisation must reach $8.5 trillion, far exceeding its present value of $1.1 trillion and nearly twice the worth of Nvidia, today's most valuable company, CNN reported.

All compensation would be granted in Tesla stock, contingent on shareholder approval at the company's annual meeting on November 6, The New York Times reported. Musk must remain at Tesla for at least seven-and-a-half years to access any shares, with a full payout only achievable after 10 years.

Robyn Denholm, Tesla's board chair, and director Kathleen Wilson-Thompson highlighted the importance of Musk's retention, stating in a letter to shareholders, “Retaining and incentivising Elon is fundamental to Tesla achieving these goals and becoming the most valuable company in history,” as reported by The New York Times.

The filing also included a shareholder proposal suggesting that Tesla take a stake in Musk's private AI firm xAI, which recently acquired the social media platform X (formerly Twitter). CNN reported that the proposal does not specify the size of the stake or its cost, and Tesla has not taken a position on it. The move could allow Musk to consolidate his business empire further.

But the pay plan is expected to face criticism. Some shareholders said that Musk's recent performance has been poor and that his behaviour has at times harmed the company.

Tesla's sales and profits have slowed over the past year, with Musk's political activities, including a stint in US President Donald Trump's administration, alienating some liberal EV buyers.

The compensation plan is reminiscent of a 2018 package that offered millions of shares if ambitious goals were achieved. Musk met those targets, but a Delaware judge later invalidated the package after shareholders claimed it was excessive and poorly disclosed.

Tesla is facing increasing competition in the electric vehicle market. According to SNE Research, a South Korean analytics firm, Chinese carmakers BYD and Geely have overtaken Tesla in global sales, with Volkswagen also posing a growing challenge, reported The New York Times.