Tesla Sets out $1tn Performance-Based Pay Deal for Elon Musk
What do you offer the world's richest man? It's a question few manufacturing boards would want to face – particularly one with the scale of Tesla’s ambition.
But that's the situation the EV manufacturer finds itself in, as it seeks to lock in Elon Musk’s leadership to drive the next phase of its growth with a proposed US $1tn compensation package.
The challenge of CEO remuneration remains a complex issue for boardrooms. It touches on more than reward – it's about how an organisation signals its priorities, sets its benchmarks for success and measures long-term risk.
At Tesla, the stakes are uniquely high. Musk's influence runs across electric vehicles, artificial intelligence, robotics and space exploration.
In response, the company has drawn up a performance-based reward framework that, if approved, would be the largest corporate award in history.
Performance-linked structure
Tesla's proposed US$1tn package is designed around long-term delivery, rather than short-term bonuses.
Musk will receive no base salary or cash bonuses. Instead, all compensation will be related to performance and awarded as 12 tranches of shares over a 10-year period.
To unlock the full award, Musk must hit 12 escalating milestones in market capitalisation. The first milestone is US$2tn, with nine additional increments of $500bn. The final two tranches each require a further US$1tn increase.
Unless Musk doubles Tesla’s valuation within the decade, he receives no payout at all.
The deal also requires strong operational delivery. Tesla has set targets including 12 million additional vehicles sold, growth and development in AI, progress in self-driving robotaxis and the ongoing deployment of its humanoid robots.
Musk has previously stated that the company’s humanoid robots, known as Optimus or Tesla Bot, may one day account for 80% of Tesla’s value.
The company set out the proposed plan in a filing to the US Securities and Exchange Commission dated 5 September.
In the filing, Tesla board members Robyn Denholm and Kathleen Wilson-Thompson said: “Growth that may seem impossible today can be unlocked with new ideas, better technology and greater innovation. We believe that Elon’s singular vision is vital to navigating this critical inflection point.
“Simply put, retaining and incentivising Elon is fundamental to Tesla achieving these goals and becoming the most valuable company in history.”
The package closely follows the announcement of Tesla’s ‘Master Plan IV’ – a strategy aimed at delivering what it calls a ‘Sustainable Abundance’ across the energy and mobility sectors.
As part of this plan, the company outlined ambitions to redefine labour through robotics, extend electric mobility and accelerate access to sustainable energy.
Board confidence tested by Musk’s public profile
The package lands at a time when Musk’s public and political profile remains a challenge for Tesla.
His vocal support for far-right political parties and his short-lived alliance with Donald Trump has sparked criticism, with some analysts suggesting a 40% fall in European Tesla sales were partially driven by political backlash.
The Wall Street Journal reported in May that Tesla’s board was considering replacing Musk due to concerns over his external focus – claims the company rejected as “absolutely false”.
Dan Coatsworth, an investment analyst at UK stockbroker AJ Bell, describes the offer as one that “beggars belief”, asking “is one person worth that much?”
He added: “One minute Tesla’s board is wondering if Elon Musk is a liability to the company given his outspoken views and political distractions, the next they’re effectively saying ‘pick a number, any number’ to lock him in for as long as possible.”
A previous 2018 Tesla pay deal for Musk worth US$55.8bn was struck down in early 2024 by Delaware judge Kathleen McCormick, who called the deal “unfathomable” and suggested that Tesla’s board had been “swept up by the rhetoric” surrounding Musk’s leadership.
In August this year, Tesla approved an interim compensation award for Musk, worth US$29bn in restricted stock.
