'This is Sick': Elon Musk Seals $1tn Tesla Pay Package Deal
The wait is over. And not just for Elon Musk.
Since Tesla proposed a staggering US$1tn compensation package for its mercurial leader in early September. speculation and commentary has been rife. Opinions have been divided, Norway publicly rebuked the sum, and even the Pope offered his opinion.
This week, the unprecedented deal was approved during a Tesla shareholder meeting on 6 November, gaining 75% of votes and drawing applause from those gathered at the company’s annual general meeting.
It’s little surprise that, taking to the stage, Musk told attendees: “Other shareholder meetings are snoozefests but ours are bangers. Look at this. This is sick.”
He also thanked the shareholders outright, saying “I super appreciate it”.
The record-breaking pay package, set over a 10-year period, involves Musk – already the world’s richest person – meeting several key milestones around growth, product delivery and lifting Tesla’s overall market value to US$8.5tn.
He won’t receive a salary under the deal. Instead, all compensation will be related to performance and awarded as shares directly tied to the milestone targets.
Breaking down a US$1tn deal
Tesla has set ambitious targets for Musk, with the board and investors stating that the pay package benefits shareholders and the business in the long run.
Over the next decade, the CEO must deliver 20 million Tesla vehicles and one million of the firm’s Optimus robots, unveiled as a humanoid prototype by the company in 2022.
The bot, which Musk has previously said may eventually account for 80% of the company’s sales, uses the same AI systems as those in Tesla’s vehicles.
Other targets include bringing one million self-driving Robotaxi vehicles into commercial operation, overseeing an additional 10 million subscribers to the company’s Full Self-Driving feature and earning up to US$400bn in core profit.
In order for him to be paid, Tesla’s stock value must rise across a series of tranches. First, the company must reach a market capitalisation of US$2tn from its current US$1.5tn, with an ultimate target of US$8.5tn.
Steps are marked as operational and valuation milestones and, for each Musk achieves, he will be awarded 1% of the stock. Hitting every milestone makes him eligible for around 12% of stock – about US$1tn.
According to Reuters, shareholders also voted in favour of Tesla investing in xAI, Musk’s AI startup, although many abstained.
Despite being a contentious move, with voters citing concerns around conflicts of interest, the investment would benefit both businesses – Tesla is firmly focused on an AI-powered future, while xAI would benefit from a large customer like the EV maker.
Opposition vs Musk
Musk’s work with xAI is one of several areas to have caused investor concern at Tesla. Investors have also cited his running of SpaceX as potentially diluting his focus on Tesla’s strategic ambitions.
Brian Mulberry, a senior client portfolio manager at Zacks Investment Management, says: “Will the growth offset these concerns of dilution or is this just giving Elon his wish of enough influence to shape the future of AI? That remains to be seen.”
Musk’s divisive nature has been challenging for Tesla.
Aside from his work with other companies, his recent forays into politics, including a short-lived alliance with Donald Trump and vocal support for far-right political parties, were cited by some analysts as the reason behind a 40% slump in European car sales for the manufacturer earlier this year.
The Wall Street Journal reported in May that the company was looking to replace Musk due to his work with Trump – claims Tesla said were “absolutely false”.
The size of the pay package has also given rise to criticism.
In September, Pope Leo singled out the Tesla CEO in an interview on rising economic inequality as a catalyst for increasing global polarisation.
The Pope said Musk is an example of the kind of wealth that is undermining “the value of human life”.
He stated: “Yesterday, there was the news that Elon Musk is going to be the first trillionaire in the world. What does that mean and what’s that about? If that is the only thing that has value anymore, then we’re in big trouble.”
Earlier this week, Norway’s sovereign wealth fund, Tesla’s sixth-largest outside investor, said it would vote against ratifying the proposed deal.
Norges Bank Investment Management (NBIM), the arm of Norway’s central bank that manages the country’s US$1.9tn sovereign wealth fund, said: “While we appreciate the significant value created under Mr. Musk’s visionary role, we are concerned about the total size of the award, dilution and lack of mitigation of key person risk – consistent with our views on executive compensation.”
Supercharging growth at Tesla
The shareholder decision will come as a relief to Tesla company Chair Robyn Denholm who, at the end of October, warned shareholders ahead of their decision they could lose Musk if they voted against.
In a 27 October letter, she said: “The fundamental question for shareholders at this year’s Annual Meeting is simple: do you want to retain Elon as Tesla’s CEO and motivate him to drive Tesla to become the leading provider of autonomous solutions and the most available company in the world?”
Having previously told shareholders that voting for Musk would “supercharge Tesla’s next phase of exceptional growth”, Robyn wrote “now is a pivotal moment for our company to emerge as a leader in AI, and with our exceptional CEO at the helm, we are perfectly positioned to seize it.”
Following the shareholder announcement, Musk discussed the company’s future, pointing to an increased focus on its Optimus robot and growth in its self-driving systems.
He said: "What we're about to embark upon is not merely a new chapter of the future of Tesla, but a whole new book."
