Tesla's pay package could give Musk billions despite missed targets
What's the story
Elon Musk's unprecedented pay package from Tesla could see him pocket billions even if he doesn't meet revolutionary targets. The potential value of the deal could reach $878 billion in Tesla stock over 10 years if all the ambitious goals set by the board are met. The deal was presented as performance-based by the company's board. However, an analysis shows that Musk could earn tens of billions just by achieving a few easier targets.
Earnings breakdown
Musk could earn billions even with minimal targets
A Reuters analysis found that even if Musk hits just two of the easier targets, he could earn $26 billion. That's more than the combined lifetime pay of the next eight highest-paid CEOs. The analysis also showed that if Musk sells an average of 1.2 million cars a year over the next decade and Tesla's market value grows from $1.4 trillion today to $2 trillion by 2035, he would get $8.2 billion in stock compensation under his pay package terms.
Goal ambiguity
Vague product-development goals in Musk's pay package
Three of the product-development goals in Musk's pay package are worded vaguely, which could allow him to earn huge payouts without significantly boosting profit. One such goal requires 10 million subscriptions to Tesla's "Full Self-Driving" software, which can't currently drive itself without human intervention. The requirement is only for an "advanced driving system," a term with no industry-standard definition.
Additional targets
Robotaxis and humanoid robots also included in Musk's targets
Another goal in Musk's pay package is to have one million robotaxis in commercial operation. However, it could be interpreted to allow humans controlling vehicles remotely or from the passenger seat, as Tesla does now in its small-scale robotaxi test. The deal also sets a target of one million robots, which could be interpreted broadly without specifying "humanoid."
Business performance
Profit measures set as toughest performance targets for Musk
Musk's toughest performance targets are likely those involving profit, a measure with no room for interpretation. The directors set eight profit goals between $50 billion and $400 billion in earnings before interest, tax, depreciation, and amortization. Tesla's 2024 earnings stood at $16.6 billion. However, Tesla's EV business is deteriorating with aging models facing fierce competition. The Cybertruck has faced challenges in the market and deemed flop by industry watchers.