Tesla’s board has approved a compensation package that could pay CEO Elon Musk nearly $1 trillion if the company achieves a series of ambitious market capitalization and operational milestones.
The agreement involves 424 million stock options, potentially increasing Musk’s stake in the electric vehicle maker to approximately 25%.
The plan is structured into 12 tranches, with each payout contingent on both specific operational goals and significant market valuation thresholds.
The first market capitalization target is $2 trillion, a considerable jump from the company’s approximate $1.5 trillion valuation at the time of the report.
Operational goals include delivering 20 million vehicles, deploying 1 million robotaxis, and selling 1 million Optimus robots. Another key requirement is for Tesla to reach an Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $400 billion. This compares to the company’s $16.6 billion EBITDA reported last year.
Before this new agreement, Musk held about 13% of Tesla’s shares following previous sales. The package was initially revealed in early September and later received shareholder approval.
Independent proxy advisor Glass Lewis urged shareholders to reject the package. The firm cited concerns over the board’s broad discretion to award tranches even if not all specified metrics are strictly met. This flexibility, Glass Lewis noted, could allow for more favorable awards to Musk without full goal achievement.
Despite these governance concerns, some Wall Street analysts are optimistic about Tesla’s potential. Dan Ives, an analyst at Wedbush, projects that Tesla could reach a $2 trillion market capitalization by early 2026. He believes it could hit $3 trillion by late 2026, driven by the volume production of autonomous vehicles and robotics.
Shares earned by Musk under the plan are subject to a lock-up period. They cannot be sold for a minimum of 7.5 years from the award date. This measure is intended to tie his incentives to the company’s long-term performance.
Musk will gain voting rights with these shares as they are received. Experts have suggested that Tesla could have utilized special voting rights shares, but Musk reportedly indicated this was not possible due to the company’s original corporate structure, unlike companies such as Alphabet or Meta.
The path to unlocking the full compensation package is complex, relying on a simultaneous combination of technological advancements, production increases, and sustained market valuation growth. Details of the package and initial market reactions were largely reported by Yahoo Finance and journalist Pras Subramanian.