Tesla offers an unprecedented $1 trillion compensation package to win Musk's heart

On Friday, according to media reports, the chairman of Tesla's board stated that the company has developed a succession plan for Elon Musk. Tesla has proposed an unprecedented compensation agreement to CEO Musk, with a potential value of approximately $1 trillion, making it the largest executive compensation plan in U.S. corporate history.

This highly anticipated proposal aims to incentivize Musk to continue leading Tesla over the coming years, setting a series of ambitious performance benchmarks, including expanding Tesla's autonomous taxi business and increasing the company's market value from its current approximately $1 trillion to at least $8.5 trillion. The plan spans 10 years.

According to the proxy statement filed by Tesla on Friday, the additional shares Musk could receive would raise his ownership stake in the electric vehicle manufacturer to at least 25%. Musk has previously publicly expressed a desire to achieve this ownership stake.

Following the news, Tesla's stock price rose 2% in pre-market trading on Friday, although the stock has fallen 16% this year.

Record Compensation Plan Addresses Legal Setbacks, Multiple Business Involvements Raise Concerns

This new compensation plan was proposed after Musk's 2018 compensation package, valued at over $50 billion, was rejected by a Delaware court. Although Tesla is appealing the ruling, the board is seeking other ways to compensate its CEO, including a temporary stock award valued at approximately $30 billion granted in early August.

According to the documents, the latest CEO reward is valued at $87.8 billion, and if Musk meets all performance targets and receives all restricted stock, that figure could balloon to approximately $1 trillion. The proxy statement also stipulates that Musk must participate in the board's development of a long-term CEO succession framework to receive the final two parts of the performance award.

The new agreement highlights Musk's firm control over the automaker, despite his involvement in multiple ventures. The 54-year-old Musk has served as Tesla's top executive since 2008 while also overseeing four other companies: SpaceX, xAI, Neuralink, and Boring Co.

Musk has previously urged the board to arrange a new compensation plan for him, suggesting that if he does not have about 25% voting control at Tesla, he would pursue the development of artificial intelligence and robotics products elsewhere. While Musk remains Tesla's largest shareholder, he has sold a significant amount of stock to fund his acquisition of Twitter. This social media platform was later renamed X by him and was acquired by Musk's xAI this year.

Business Focus Shifts to Emerging Fields

The incentives in the new plan are designed to keep Musk focused on Tesla while the company seeks growth in emerging markets such as robotics and artificial intelligence. Friday's documents also included a non-binding shareholder proposal suggesting that Tesla invest in Musk's xAI startup, an idea Musk had previously discussed An $8.5 trillion market capitalization would be more than twice that of Nvidia, currently the most valuable company in the world, with Tesla's market value reaching a peak of approximately $1.5 trillion by the end of 2024.

Tesla's board chair Robyn Denholm and director Kathleen Wilson-Thompson stated in a letter to shareholders that, in short, retaining and motivating Musk to achieve these goals for Tesla and become the most valuable company in history is crucial.

Tesla launched its long-promised autonomous taxi service on June 22, initially deploying a small number of driverless taxis in Austin, which Musk sees as an important component of the company's future business