It took some tough bargaining, but the Tesla board managed to keep Musk's pay plan under $1 trillion

Tesla's nearly $1 trillion new pay plan for Musk would expand his voting power
Lora Kolodny

Tesla is asking investors to approve yet another outsized pay plan for CEO Elon Musk, according to a financial filing out Friday.

The total package is worth about $975 billion based on the maximum payout, assuming share count remains.

The proposed plan for Musk, already the world’s wealthiest individual, consists of 12 tranches of shares to be granted if Tesla hits certain milestones over the next decade. It would also give Musk increased voting power over the EV maker and aspiring robotics titan, which he has publicly demanded since early 2024.

Tesla Chairwoman Robyn Denholm told CNBC’s Andrew Ross Sorkin the plan was designed to keep the CEO “motivated and focused on delivering for the company.”

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Denholm confirmed that the Tesla CEO pay plan, if approved by shareholders, would not put any limit on where and how Musk spends his time or require him to spend any minimum number of hours per week on Tesla business. 

To obtain the first award in the plan, Musk and Tesla would need to almost double their current market cap to reach $2 trillion. The final benchmark is reaching an $8.5 trillion market cap.

The operational milestones in the 2025 CEO Performance Award include: 20 million Tesla vehicles delivered, ​10 million active FSD Subscriptions, ​1 million robots delivered, ​1 million Robotaxis in commercial operation and a series of adjusted EBITDA benchmarks.

There's an old sales psychology trick where you start with the outrageous ask, then follow up with the merely exorbitant. While the full award is attached to a string of virtually impossible accomplishments, some of the lower tiers—each of which appears to come with its own absurdly generous payout—are within reach given creative accounting and assuming sufficient market irrationality and/or massive government corruption.

If Donald Trump were to announce a major initiative—buying robots, or a fleet of government robotaxis, or perhaps a joint project between Tesla and SpaceX to build an interstate hyperloop system—even if no real progress was ever made (a near certainty for the last example) and relatively little money actually changed hands, it is not difficult to imagine today’s febrile market pumping the stock up well past two trillion dollars. By way of precedent, remember that when last I checked, Tesla was trading at a price-earnings ratio of just over 200, while Musk’s longtime frenemy and classic Bond villain Peter Thiel’s company Palantir shot up to a P/E of over 500 shortly after the 2024 election.

As previously discussed, the idea that Elon Musk needs additional incentive to keep Tesla's stock price up is obviously absurd. He is the company's largest shareholder and, while the details can be a bit murky, certainly much and possibly most of his wealth would evaporate if Tesla implodes (i.e. starts trading at a reasonable level given the fundamentals). He quite literally has more to lose than anyone else if things go south.

He does, however, have real leverage here, though of a kind that no one involved with the company would ever admit: he is the face of the con. This is, and has been for years, the biggest and most brazen stock pump in history. Tesla is a 20-plus-year-old niche automobile company with a tiny product line and no new vehicles in the pipeline. The bull case for the stock is now based almost entirely on robotaxis and humanoid robots—despite the fact that the company is far behind the industry leaders in both fields in terms of technology, and even if it were somehow capable of leapfrogging the competition, those potential markets probably aren't big enough to justify Tesla's current market cap, let alone tell a story of explosive growth. 

In what should be related news... 

Tesla’s U.S. market share dropped to a near eight-year low in August as buyers chose electric vehicles from a growing stable of rivals over the aging lineup offered by CEO Elon Musk’s company, according to data from research firm Cox Automotive shared exclusively with Reuters.

The decline highlights the threat from automakers ramping up EV incentives at a difficult time for the industry. Analysts expect an EV sales bump to continue through September in the United States, then drop when federal tax credits expire at the end of the month, raising financial pressure on Tesla and other automakers.

Tesla, which once held more than 80% of the U.S. EV market, accounted for 38% of the total EV sales in the United States in August, the first time it has fallen below the 40% mark since October 2017, when it was ramping up production of the Model 3, its first mass market car, according to early data from Cox.

While other automakers are rolling out new EVs, Tesla has turned its focus to building robotaxis and humanoid robots, delaying and cancelling plans for cheaper electric vehicle models.