Tesla on Friday outlined a new compensation package for Elon Musk that could be worth close to $1 trillion if the automaker achieves several goals over the next decade, following apparently contentious negotiations in which the billionaire chief executive threatened to leave the company.
Key Takeaways
- The company outlined the plan in an SEC filing, which could see the billionaire gain an additional 12% stake in the electric car maker, in line with a demand Musk made last year.
- The compensation package was finalized after 10 meetings between Tesla’s board and Musk, who “raised the possibility that he may pursue his other interests and leave Tesla” if he was not assured a 25% voting interest, a threat Tesla’s board determined was “genuine,” according to the filing (Bloomberg was first to report Musk’s terms).
- Tesla disclosed it was “critical” for the automaker to secure Musk’s commitment to the company, while also receiving assurance Musk’s “involvement with the political sphere would wind down in a timely manner.”
- In the filing, the company notes it “does not currently have a long-term CEO performance award in place to retain and incentivize Elon to focus his energies on Tesla,” and it was “time to change that.”
- To receive his full compensation reward, Musk will need to meet the ambitious goal of raising Tesla’s market cap from around $1 trillion at present to $8.5 trillion within a ten-year period.
- Other set goals include selling 12 million more electric cars, 10 million autonomous driving subscriptions, operate 1 million Robotaxis, sell 1 million Tesla Bots and increase adjusted earnings to $400 billion, among others.
Crucial Quote
In a letter to shareholders included in filing, Tesla board chair Robyn Denholm says: “Simply put, retaining and incentivizing Elon is fundamental to Tesla achieving … its goals and becoming the most valuable company in history.” Later she adds: “We believe Elon is the only person capable of leading Tesla at this critical inflection point.”
How Have The Markets Reacted?
In premarket trading early on Friday, Tesla’s shares popped 2.03% to $345.40. However, the electric carmaker’s stock price has fallen more than 10% since the start of the year and nearly 30% since mid-December, amid flagging sales and backlash over Musk’s political activities.
Forbes Valuation
Musk’s current net worth stands at $430.9 billion, according to Forbes’ estimates. His fortune puts Musk on top of the Forbes Real Time Billionaires list by a significant margin, ahead of Oracle founder Larry Ellison, Meta founder and CEO Mark Zuckerberg and Amazon founder Jeff Bezos.
Tangent
If all goals are attained, the new compensation plan would raise Musk’s stake in Tesla to around 25%. In a series of posts on X last year, Musk said he was “uncomfortable growing Tesla to be a leader in AI & robotics” without having around 25% of the voting power in the company. The billionaire argued that such an arrangement would be enough for him to be influential, “but not so much that I can’t be overturned.” He said, “At 15% or lower, the for/against ratio to override me makes a takeover by dubious interests too easy.” Musk’s demand for increased voting power came with the threat that he would prefer to build products” outside of Tesla.
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