Elon Musk, CEO of Tesla Inc. (NASDAQ:TSLA), has been awarded a $1 trillion pay package, a first in global corporate history. Earlier this month, this compensation plan was approved by Tesla shareholders.
What Happened: The pay package, structured to motivate Musk’s performance, sets high targets for him to qualify for any remuneration. However, critics have pointed out potential loopholes that could allow Musk to reap substantial benefits by making grand promises and delivering just enough to secure a significant reward.
The package comprises 12 tiered grants of restricted stock, each unlocked by achieving a valuation and an operational goal.
The market cap triggers start at $2 trillion and increase by increments of $500 billion to a peak of $8.5 trillion. Operational milestones include sales targets for key products and Ebitda tiers starting at $50 billion, maxing at $400 billion, reports the Fortune.
Musk has a ten-year window to hit the numbers that trigger the grants. If Musk reaches a new valuation goal and captures any one of the dozen operational targets in any order, he receives 35.312 million shares in Tesla restricted stock, adding roughly 1% to his current stake of almost 16%.
However, critics argue that the lower targets are too easy to achieve, while the higher goals marking substantial progress in profitability are too difficult.
This imbalance could result in Musk not receiving the $1 trillion but still pocketing one of the largest payoffs in corporate America, potentially at the expense of shareholders.
Why It Matters: Despite the criticism, Musk and several Wall Street analysts remain optimistic about the pay package, drawing parallels to a similar arrangement from 2018 that significantly boosted Tesla’s share price. This optimism stems from Musk’s track record of achieving ambitious targets and driving Tesla’s growth.
However, the potential for Musk to profit significantly without fully achieving the set targets raises questions about the fairness of the pay package and its implications for Tesla shareholders.
The coming years will reveal whether this pay package will indeed serve as a boon or a bane for Tesla and its shareholders.
Read Next
Elon Musk On Track To Become World’s First Trillionaire Within Three Years
