Tesla Motors chief executive Elon Musk is set for an unprecedented $1 trillion pay package, provided he can drive the company towards a valuation of $8.6 trillion within the next decade.
The pay-for-performance plan revealed by Tesla on Friday sets up Mr Musk for more clout as he delves into technologies beyond electric vehicles and amid a legal battle over a previous salary package worth $56 billion.
The $8.6 trillion valuation would be more than eight times Tesla's market capitalisation, which on Friday stood at about $1.06 trillion. If it is achieved, Mr Musk's would be granted up to 12 per cent of Tesla shares – equivalent to about $1.03 trillion.
He is already the world's richest person, with an estimated wealth of about $378 billion, according to the Bloomberg Billionaires Index.
The move, revealed in a filing to the US Securities and Exchange Commission, comes after Tesla in early August approved an interim stock award worth about $30 billion to Mr Musk. At that time, the company said it would put forward a longer-term compensation plan to a vote at its annual meeting on November 6.
Tesla also argued that it structured Mr Musk's pay package unlike its corporate peers, saying traditional benchmarking analysis is “irrelevant” in his case, based on his success at the company.
The decision was particularly based on Mr Musk's achievements for its 2018 performance award and the “magnitude” of the milestones for this year, according to the filing.
“[Tesla's] Special Committee was aware of the size of the compensation packages provided to chief executive officers at Tesla’s peer group companies and public companies with a similar market capitalisation, but expressly declined to recommend setting the amount of Mr Musk’s incentive compensation opportunity by benchmarking to these chief executive pay packages,” it said.
“Mr Musk is being asked to transform Tesla and, in so doing, provide transformative technologies to better society as a whole.
“Accordingly, traditional compensation packages granted to executives at other companies were determined to not be appropriate for designing Mr Musk’s incentive compensation.”
Mr Musk has long sought more voting power within Tesla. He will be granted this if he achieves Tesla's goals, raising his 13 per cent voting stake to give him more say on governance and key corporate issues.
This “provides Mr Musk with the opportunity to earn voting influence while challenging him to meet a series of extraordinary performance milestones”, Tesla said.
The compensation comes as Mr Musk continues to push his interests outside EVs, particularly in robotics and the booming artificial intelligence industry.
Tesla had already introduced its autonomous Robotaxis and Optimus humanoids, while xAI has been going toe-to-toe with generative AI majors including Google, Microsoft and ChatGPT maker OpenAI.
His SpaceX is also ramping up its operations, especially after its Starship carrier for missions to the Moon and Mars completed test flights last week.
Tesla's new plan overlaps a continuing legal fight involving a $56 billion pay package for Mr Musk, which some shareholders had challenged. Last December, Judge Kathaleen McCormick voided the pay, despite Tesla shareholders approving it in vote in June.
The company said in Friday's filing that Mr Musk’s $56 billion award has “helped lift the ceiling on CEO pay” while also acknowledging the widening the gap between workers’ and executives’ pay packages.
However, Tesla argued that “no company in the world has … compensation plans where pay for their most important executive is entirely contingent on achievement of such daunting and challenging goals”.
