Elon Musk set a series of aggressive growth targets at Tesla Inc. that would make the electric carmaker one of the world’s most valuable companies within the next decade, and assured shareholders he’ll stick around by tying his compensation to those goals.
The unprecedented pay package proposed Tuesday ties the 46-year-old chief executive officer’s personal wealth to that of shareholders — he won’t get paid unless the stock rises. It envisions a staggering increase in market value to $650 billion that would put Tesla in the league of tech giants like Google parent Alphabet Inc. and Microsoft Corp., now more than 10 times its size. Revenue would expand to $175 billion, ahead of General Motors Co.
The move assures investors that Musk will lead Tesla through its next phase of rapid growth despite his many other commitments and interests. He is also the chief executive officer of Space Exploration Technologies Corp. and has embarked on several other ventures including OpenAI, Neuralink and the Boring Co.
Under the plan, which requires shareholder approval in March, Musk’s pay is tied strictly to stock performance and profit. He will receive no salary or bonus. A 10-year grant of stock options vests in 12 tranches that are linked to market capitalization in $50 billion increments, starting at $100 billion. There are also milestones tied to revenue and adjusted earnings before interest, taxes, depreciation and amortization, Tesla said in a statement.
The agreement requires Musk to remain as Tesla’s CEO or serve as executive chairman and chief product officer — paving the way for the company to eventually hire another CEO who would report to Musk. The plan is aimed at ensuring that Musk “will continue to lead Tesla’s management over the long-term while also providing the flexibility to bring in another CEO who would report to Elon at some point in the future,” the company said.
Tesla, based in Palo Alto, California, has more than 33,000 employees worldwide and recently launched the Model 3 sedan, a more affordable electric car that is the linchpin to the company’s efforts to reach the mass market and profitability. Tesla, which has struggled to ramp up production of the Model 3, no longer includes vehicle output targets in Musk’s proposed compensation plan.
The company also sells its batteries to utilities seeking to integrate renewable forms of energy like solar and wind onto the grid, and is expanding its product line to include a solar roof product for homeowners. Musk’s personal brand as a futurist is deeply intertwined with the identity of the company, which has legions of fans and devoted customers but has yet to make an annual profit.
Musk’s previous compensation plan was also tied to stock performance and vehicle development targets set in 2012. The carmaker was valued at $59.1 billion at the close Tuesday. The shares have returned 13 percent since the start of the year.
At current market pricing, $650 billion would make Tesla the fourth-most valuable U.S. company, behind Apple Inc., Microsoft and Alphabet, and exceed the market capitalization of Volkswagen AG, the world’s biggest carmaker, almost sixfold.
Musk, who is already the biggest Tesla shareholder, has a net worth estimated at $21.5 billion, according to the Bloomberg Billionaires Index. The new pay plan would add as much as $55.8 billion to that total. The company said that figure was theoretical, because it doesn’t factor in likely dilution.