Musk has been especially bullish on Tesla’s prospects of late, touting an X post this week from an ally who said the company’s humanoid robot Optimus – still in development – would be “the most successful product in the history of humanity”.
“It will take incredible effort, but I think it is possible,” Musk said.
In late July, he weighed in on a different user’s claim that Tesla, currently worth over US$1t, could one day hit a US$25t valuation. “It is an immense amount of work, but possible,” Musk said. (The current US annual gross domestic product is around $30t.)
In a letter to shareholders, Tesla Chair Robyn Denholm said the new proposed pay package would ensure Musk is “eager” to help Tesla grow.
“We believe that Elon’s singular vision is vital to navigating this critical inflection point,” Denholm wrote. “We also recognise the formidable nature of this undertaking and as a result, the importance of having a leader who is not only willing and capable but eager to meet this challenge.”
Musk and his brother Kimbal, both board members, recused themselves from consideration of the proposal, according to the filing. Musk already tops the rankings of the world’s richest people, with a net worth of US$378b according to the Bloomberg Billionaires Index.
Tesla’s board members said the pay package proposal arose following 10 meetings with Musk, in which he threatened at least once to turn his focus elsewhere if he did not receive a bigger stake in the company. Musk publicly made a similar argument last year, when he held around a 13% stake.
“During negotiations, Mr Musk reiterated that, if he were to remain at Tesla, it was a critical consideration that he have at least a 25% voting interest in Tesla and that he receive assurances that he would be compensated for his past services in accordance with the 2018 CEO Performance Award,” the company’s proxy statement laying out the new proposal said. “Mr Musk also raised the possibility that he may pursue other interests that may afford him greater influence if he did not receive such assurances.”
Musk, who is 54, built his fortune as a co-founder of PayPal and other companies, but much of his wealth is tied up in Tesla stock, which ballooned through a contested 2018 pay package.
His pay has hung in the balance since a Delaware judge early last year ruled the compensation package had been awarded through an unfair process and should be undone. That led Tesla shareholders to vote to restore the more than US$50b pay package months later, but the same Delaware Chancery Court judge upheld her prior decision in December.
Tesla’s board said last month it would award Musk around US$30b worth of shares if he remained an executive for at least two years, in an initial attempt to address the matter of Musk’s pay while the 2018 package is tied up in Delaware court.
Dan Ives, a Wedbush Securities analyst and longtime Tesla bull, called the potential US$1t payout an “eye-popping” figure that is nonetheless necessary to retain Musk as CEO.
“This represents a critical next step to keep Musk as CEO at least until 2030 with Tesla heading into one of the most important stages of its growth cycle with the autonomous and robotics future now on its doorstep,” Ives wrote.
Under the deal, Musk would unlock a tranche amounting to about 1% of Tesla shares for each US$500b in market value added, though the first tranche requires Tesla to reach a valuation of US$2t – nearly twice its current valuation.
The pay package also calls for a long-term succession plan to be outlined – with Musk’s participation – as a condition for unlocking the final two tranches of the deal. Each also requires an additional US$1t increase to Tesla’s market cap to unlock the shares.
The proposal will be presented to shareholders at Tesla’s November annual meeting, carrying a board recommendation to vote in favour. Shareholders voted by a wide margin to approve Musk’s earlier pay package when it was put to a vote in June 2024.
Sign up to Herald Premium Editor’s Picks, delivered straight to your inbox every Friday. Editor-in-Chief Murray Kirkness picks the week’s best features, interviews and investigations. Sign up for Herald Premium here.
