Tesla is proposing a compensation package for CEO Elon Musk valued at approximately $1 trillion, potentially the largest corporate payout ever.
The proposed package includes the grant of 423.7 million additional Tesla shares to Musk. This award is contingent on Tesla increasing its market capitalization from $1 trillion to $8.5 trillion within the next decade, surpassing Nvidia to become the world’s most valuable company.
A notable condition within the details of the agreement suggests a gradual reduction of Musk’s involvement in “the political sphere.” This stipulation comes after concerns that Musk’s relationship with former President Donald Trump and engagement with far-right politics have negatively impacted Tesla, including a decline in European sales and a drop in his public approval rating.
Robyn Denholm, Tesla’s chairwoman, explained to CNBC that the package aims to keep Musk “motivated and focused on delivering for the company.”
In a letter to shareholders, who have yet to approve the deal, she stated, “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.”
She added, “Tesla does not currently have a long-term CEO performance award in place to retain and incentivise Elon to focus his energies on Tesla and lead us through this pivotal moment in our history. It’s time to change that.”
Dan Ives, described by CNN as “one of the biggest Tesla bulls on Wall Street,” commented, “It’s a big pay package, but Tesla needs to keep its biggest asset in Musk as CEO.”
He further stated, “The Board had a 1 trillion dollar decision and made the right one.”
Facing increased competition in the electric vehicle market, particularly from China, Tesla is heavily investing in its new Robotaxi service, which has seen initial success in Austin, Texas. However, it also encounters significant rivalry from companies like Amazon and Alphabet, accompanied by safety concerns.
Ross Gerber, a significant Tesla investor, told CNN in July that he believes Musk is shifting away from the traditional automotive industry, leading to the company’s focus on robotics and autonomous vehicles.
“He doesn’t want to be in the car business anymore,” Gerber explained. “He knows that everybody hates him. So, he thinks, ‘Let’s just focus on this robotaxi business and making robots, because if I put a big shiny object in front of people, they’ll be distracted from the reality that Tesla has real problems and I don’t have a solution for them.’”
The proposed pay package resembles the structure of Musk’s 2018 compensation plan, initially deemed unattainable. However, Tesla’s subsequent growth from a $59 billion to a $650 billion valuation resulted in Musk receiving $56 billion in stock options, contributing to his status as the world’s wealthiest individual.