- Tesla just proposed a new pay package worth up to $1 trillion for CEO Elon Musk.
- To earn it, Musk needs to hit milestones like turning Tesla into the most valuable company ever and selling one million robots.
- Here are some key takeaways from the unprecedented proposed new pay package.
Tesla has unveiled a new pay package for Elon Musk that could turn the world's richest man into the first trillionaire.
The EV giant announced on Friday that it would submit the enormous new compensation plan, which requires the Tesla CEO to boost the company's valuation to $8.5 trillion, for shareholder approval in November.
The proposed pay package is unprecedented in both its size and the scale at which Tesla will have to grow for Musk to achieve it.
Here are five takeaways from what could end up being one of the largest pay packages in corporate history.
It requires Musk to help with succession planning
The massive compensation package is structured so that it pays out tranches of shares over a 10-year period, as Musk hits specific goals.
One of the final objectives needed to unlock the full payout is for Musk to set up a "CEO succession framework," according to Tesla's SEC filing.
In May, Musk said he would be Tesla's CEO in five years' time "unless I die." But questions over who would take over Tesla if Musk were to step down have been swirling for years. If the billionaire wants to earn his full $1 trillion payout, he'd need to finally answer them.
Tesla's board says the pay package may still not be enough to keep Musk
In the "considerations and risks" section of Tesla's SEC filing, the company's board warned shareholders that if they don't approve the deal, Musk might leave Tesla for good.
Musk has previously hinted that he could reduce the amount of time he spends working on Tesla if he doesn't gain more voting control. The company said Musk could leave if Tesla fails to "adequately retain and incentivize him."
On the other hand, Tesla's SEC filing says that there is still a chance the $1 trillion pay package "may not be sufficient" to keep Musk at the company.
Tesla's risk assessment pointed to the package's contingent nature and the risk of legal challenges like the one that derailed Musk's previous pay deal.
Musk would get more voting control
The proposed pay package aims to address Musk's long-running frustrations with the amount of voting control he has at Tesla.
If he meets the compensation plan's targets, the billionaire's Tesla stake would rise from 13% to at least 25%. That's the level of control at which Musk said in January he would feel comfortable expanding Tesla's AI and robotics initiatives.
Depending on what happens with Musk's previous pay package, which is trapped in legal limbo, the Tesla CEO's voting stake could eventually hit nearly 29%.
Tesla's board says Musk's situation is unlike any other CEO
Musk's 2018 compensation package, which was struck down by a Delaware judge last year, was already unprecedented in the history of executive pay — and that $46.8 billion payout is dwarfed by the Tesla CEO's new compensation plan.
In its SEC filing, Tesla's board said it was "irrelevant" to benchmark Musk's pay against the pay packages enjoyed by other CEOs, as no other chief executive faced such challenging and complex performance targets.
Instead, the board said a "special committee" had based Musk's new pay on his previous compensation plan after concluding that he was best motivated by "a pay-for-performance compensation framework with ambitious goals that no one else has achieved before."
