Tesla’s board has proposed a new pay package for chief executive Elon Musk worth $1 trillion (€855bn) over the next decade if he is able to hit a series of formidable targets.
Musk will receive no salary or bonus under the plan unveiled on Friday, but would collect shares in instalments unlocked by increases in Tesla’s market value, combined with milestones including a huge increase in earnings and selling millions of cars, robotaxis and artificial intelligence-powered robots.
“Retaining and incentivising Elon is fundamental to Tesla … becoming the most valuable company in history,” chairwoman Robyn Denholm said in a letter to investors. The package is “designed to align extraordinary long-term shareholder value with incentives that will drive peak performance from our visionary leader”.
The board stressed that Musk’s incentives were aligned with investors’ interests and he will receive nothing if Tesla’s growth stalls. However, the sheer scale of the deal is likely to revive a fierce debate over the earnings of the world’s richest man.
Musk’s 2018 Tesla pay deal was struck down by a Delaware judge after a protracted court battle. He has already amassed a $374 billion fortune from his stake in Tesla and private holdings in SpaceX, xAI, Neuralink and The Boring Company.
Musk has repeatedly raised the prospect of reducing his commitment or even leaving Tesla if he is not given greater voting rights.
Achieving the maximum payout of 423 million shares will be extremely challenging. Musk would have to boost Tesla’s market capitalisation to $8.5 trillion from $1.09 trillion today. That is more than twice that of Nvidia, currently the most valuable company in the world at $4.2 trillion.
Tesla must also sell 12 million more electric vehicles; reach 10 million autonomous driving subscriptions; register and operate 1 million cars in its Robotaxi network; sell 1 million AI robots and increase adjusted earnings 24-fold to $400 billion.
Those top-end targets appear distant considering Tesla’s adjusted earnings were $16.6 billion last year; it has sold only 8 million cars to date, zero robots or robotaxis, and comparatively few so-called Full Self-Driving subscriptions.
The first valuation milestone is $2 trillion. If Musk fails to double Tesla’s valuation over the 10-year period of the plan, he will receive nothing.
The market cap targets then ratchet up in $500 billion and $1 trillion increments to $8.5 trillion. When each level is hit, it must be paired with one of the other earnings or sales targets to activate a tranche of shares.
There are multiple earnings before interest, taxes, depreciation and amortisation targets that also escalate in stages, starting at $50 billion and rising to a maximum of $400 billion.
Each of the 12 levels is worth 1 per cent of Tesla stock, each equivalent to about 35 million shares. If a valuation level is achieved, married with a second profit target and sustained for six months, Musk will gain and retain the voting rights of the shares.
However, he cannot sell that stock for seven-and-a-half years and must negotiate with the board before making any large disposals to reduce volatility in the stock price.
Towards the end of the 10-year timescale of the plan, when he is 64 years old, Musk must “participate in the board’s continued development of a framework for long-term CEO succession”, the proposal states.
To hit his targets, Musk will have to reverse a slide in Tesla’s share price, which has fallen 30 per cent since mid-December. Sales have plunged amid a consumer backlash against Musk’s divisive political activism and investor concern about his rift with President Donald Trump, who has cancelled numerous EV and solar incentives.
The structure echoes Musk’s deal from 2018, which was also thought to be unachievable, but that paid out in full after Tesla’s value grew from $59 billion to exceed $650 billion. That netted Musk $56 billion in stock options, the largest pay award in history.
However, the controversial package was struck down by a Delaware judge last year who ruled its size was excessive and the board was too close to Musk after a seven-year court battle.
Tesla has appealed to the state’s supreme court and moved its incorporation to Texas.
With the case still pending, Tesla last month awarded Musk 96 million shares worth about $30 billion in what it described as a “good faith” interim payment. That has increased his ownership from 13 per cent to 16 per cent. The interim payment will be voided if the 2018 package is reinstated, which would boost Musk’s stake to about 20 per cent.
If the entire 2025 package is activated and Tesla wins the Delaware appeal, Musk’s control would rise to 32 per cent. However, after taxes and dilution, that would end up at about 25 per cent of the votes, a person familiar with the structure told the Financial Times.
Musk has argued that without at least a fifth of the shares he could be vulnerable to activist investors or a takeover, which is dangerous as it develops powerful AI technology and millions of robots.
The board will ask shareholders to vote on the new package at its November 6 annual meeting in Austin, Texas. If Tesla wins more than 50 per cent of votes cast, 423 million additional shares will be issued on top of the 3.2 billion outstanding.
Musk and his brother Kimbal, who is on the board, are allowed to vote under Texas laws, whereas they have had to recuse themselves in prior matters about his pay. − Copyright The Financial Times Limited 2025