Tesla has offered CEO Elon Musk an unprecedented pay package of around $1 trillion in what is set to be the largest corporate payout in history.
The package, which would grant Musk an additional 423.7 million shares in Tesla stock, will be awarded if the company increases its market valuation from $1 trillion to $8.5 trillion over the next decade, overtaking Nvidia to become the world’s most valuable company.
Also included in the small print is a stipulation that Musk’s activities in “the political sphere would wind down in a timely manner” after the billionaire’s on-off relationship with President Donald Trump and far-right politics have seen Tesla’s share price tank, the company’s market share in Europe fall through the floor, and Musk get voted the most unpopular man in America.
Tesla’s chairwoman, Robyn Denholm, told CNBC that the package was designed to keep Musk “motivated and focused on delivering for the company.”
“We believe that Elon’s singular vision is vital to navigating this critical inflection point,” she wrote in a letter to shareholders, who have yet to approve the deal. “Simply put, retaining and incentivising Elon is fundamental to Tesla achieving these goals and becoming the most valuable company in history.”
She added: “Tesla does not currently have a long-term CEO performance award in place to retain and incentivise Elon to focus his energies on Tesla and lead us through this pivotal moment in our history. It’s time to change that.”
Dan Ives, whom CNN described as “one of the biggest Tesla bulls on Wall Street,” told the network: “It’s a big pay package, but Tesla needs to keep its biggest asset in Musk as CEO.”
“The Board had a 1 trillion dollar decision and made the right one,” he added.
The company, which faces growing competition in the electric vehicle market from China, is betting big on its new Robotaxi service, which has seen some success after its launch in Austin, Texas, this year. However, it is also facing stiff competition in the market from both Amazon and Alphabet, with concerns raised over its safety.
Top Tesla investor Ross Gerber told CNN in July that he doesn’t believe Musk wants to be in the auto industry anymore, hence the company’s pivot to robotics and automated cars.
“He doesn’t want to be in the car business anymore,” Gerber said. “He knows that everybody hates him. So, he thinks, ‘Let’s just focus on this robotaxi business and making robots, because if I put a big shiny object in front of people, they’ll be distracted from the reality that Tesla has real problems and I don’t have a solution for them.’”
Musk’s pay package mirrors a similar structure to the one he was awarded in 2018, which was also thought to be unachievable but was later paid out in full after Tesla’s value grew from $59 billion to $650 billion, netting Musk $56 billion in stock options and contributing to his status as the world’s richest man.
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