Key points
- Tesla is proposing a $975 billion (maximum) compensation plan for Elon Musk over the next decade.
- The plan consists of 12 tranches of shares, contingent upon Tesla achieving ambitious market cap and operational milestones.
- Musk would gain increased voting power. Shareholders will vote on the plan on November 6th.
- The plan includes a shareholder vote on Tesla investing in Musk’s xAI venture.
Tesla has filed a proposal for a new, massive compensation package for CEO Elon Musk, potentially worth up to $975 billion based on maximum payout and assuming the current share count. This plan follows a previous compensation plan that was deemed excessive by a court in Delaware.
The new proposal outlines 12 tranches of shares granted if Tesla achieves specific market capitalization and operational milestones over the next ten years. These milestones are incredibly ambitious, ranging from doubling the current market cap to achieving a staggering $8.5 trillion valuation.
Operational targets include delivering 20 million vehicles, achieving 10 million active Full Self-Driving subscriptions, delivering 1 million robots, and having 1 million robotaxis in commercial operation, alongside several adjusted EBITDA benchmarks.
This substantial reward, exceeding 423 million additional shares, comes with a notable caveat: there are no restrictions on Musk’s time allocation across his various ventures, including SpaceX, The Boring Company, Neuralink, and xAI.
Tesla Chairwoman Robyn Denholm defended the plan, stating it’s designed to keep Musk motivated and focused on Tesla’s ambitious goals. She clarified that the equity awards are tied to both market cap achievements (1% for every half-trillion-dollar increase) and operational milestones.
The proposal also includes a shareholder vote on whether Tesla should invest in Musk’s artificial intelligence venture, xAI, which recently merged with his social media platform, X. This follows an informal poll on X last July, where Musk suggested a $5 billion investment.
xAI currently operates a large data center in Memphis, with plans for expansion to support its large language models and Grok chatbot. The significant investment in xAI highlights the interconnectedness of Musk’s various businesses and the potential for further integration.
The new proposal is noteworthy given the previous legal challenge to Musk’s 2018 compensation plan. A Delaware court ruled that the earlier plan was excessive and improperly granted, finding Musk had undue influence over the negotiations.
This new proposal, therefore, attempts to address the concerns raised in the previous legal proceedings, while still providing Musk with potentially immense financial incentives tied to Tesla’s future success. The upcoming shareholder vote on November 6th will determine the fate of this ambitious compensation plan.
