Tesla CEO Elon Musk could receive the largest corporate pay package in history worth as much as $878bn if he meets certain performance targets.
Here is what this means, and how Musk could become history’s first trillionaire.
What has been announced?
Musk won a Tesla shareholder vote on Thursday, with more than 75 percent in favour, during the company’s annual general meeting at the electric carmaker’s factory in Austin, Texas.
Under this plan, Musk could be given stock worth $1 trillion over the next decade if he hits certain performance targets. However, he would be required to repay some of this to the company – bringing it down to $878bn.
Musk is already the richest man in the world, worth about $473bn, according to Bloomberg. This payout would take him over the $1-trillion line if he maintains this level of wealth.
Tesla shares jumped by 2 percent in pre-market trading on Friday, but have soared by more than 62 percent in the past six months.
How did Musk react after the results were announced?
After the announcement, Musk climbed on stage and danced while investors chanted his name.
He expressed triumph, as well as appreciation for the shareholders after the vote tally. “I super appreciate it,” he told the shareholders.
“Fantastic group of shareholders. Hang on to your Tesla stock,” Musk said.
“Other shareholder meetings are like snoozefests, but ours are bangers. I mean, look at this. This is sick,” Musk said.
Musk pledged to start production of a two-seater steering-less robotaxi called a “Cybercab” in April. He also promised to unveil Tesla’s next-generation Roadster electric sports car.
He added that Tesla will need to acquire large-scale chip manufacturing capabilities to support its move into artificial intelligence (AI). For this, the company may consider collaborating with Intel, one of the world’s largest semiconductor companies.
Optimus, unveiled as a prototype by the company in 2022, is designed to be an “autonomous humanoid robot” performing “unsafe, repetitive or boring tasks.”
“What we are about to embark upon is not merely a new chapter of the future of Tesla, but a whole new book,” Musk told a crowd of cheering stakeholders.
What goals does Musk have to achieve in order to be paid?
In order to get the pay package, Musk needs to meet a series of operational goals.
This includes manufacturing 20 million vehicles over the next decade, and bringing 1 million operational robotaxis to the roads.
He must attract 10 million subscriptions to Tesla’s Full Self-Driving feature on its cars.
He must also generate profits of up to $400bn.
Another condition is that Tesla’s market valuation must continue to rise above its current $1.5 trillion and reach set milestones, which start at $2 trillion.
After that, he must raise the valuation by nine tranches each of $500bn until the market valuation reaches $8.5 trillion by 2035.
The board’s proposal states that Musk would have to “completely transform Tesla and society as we know it” and he would get “zero” unless he meets the “incredibly ambitious” goals.
However, an analysis by the Reuters news agency, which weighed Musk’s performance goals, as well as insights from more than a dozen experts, found that Musk could still be paid more than $50bn by achieving just some of the board’s goals.
The deal also ties Musk to Tesla for the next 10 years.
The proposal was contentious, with some investors opposing it because of its massive scale. However, the Tesla board warned that Musk might leave the company if the vote did not pass.
Board members said the 75 percent vote in favour of the pay deal demonstrated investor confidence in the long-term leadership by Musk, who has ambitions to move further into AI – particularly by making progress with the Optimus robot, which was unveiled in 2022 and is designed to be an “autonomous humanoid robot” performing “unsafe, repetitive or boring tasks”.
Other investors have expressed doubts about the move towards AI, rather than focusing on electric vehicles. In a post on X, analyst Gene Munster, managing partner at Deepwater Asset Management, said: “Let it sink in where Musk’s head is at. His vision of the ‘new book’ starts with Optimus.”
Which major investors opposed the deal?
Major investors who opposed the deal included Norway’s sovereign wealth fund, Glass Lewis and Institutional Shareholder Services.
Norway’s sovereign wealth fund, which is the Government Pension Fund of Norway, owned 1.14 percent of Tesla as of its half-year filings in June.
Glass Lewis is a California-headquartered corporate governance research and proxy advisory firm, while the Institutional Shareholder Services is a corporate governance and responsible investment solutions with headquarters in Maryland.
Will Musk be paid in cash or another form?
Musk will not receive cash or a salary under this pay deal. Instead, he will be awarded up to 423.7 million additional Tesla shares.
