Tesla CEO Elon Musk could receive the largest corporate salary in history, worth $878 billion, if he meets certain performance goals.
We explain what this means and how Musk became the first billionaire in history.
What was announced?
Musk won the Tesla shareholder vote Thursday with more than 75% approval at Tesla’s annual meeting at the electric car maker’s factory in Austin, Texas.
Under the plan, Musk could be awarded $1 trillion worth of stock over the next 10 years if he meets certain performance goals. However, he will have to repay some of this to the company, reducing the amount to $878 billion.
According to Bloomberg, Musk is already the richest person in the world with a net worth of about $473 billion. If he maintains this level of wealth, this dividend will cross the $1 trillion line.
Tesla shares rose 2% in premarket trading Friday, but have soared more than 62% in the past six months.
How did Mr. Musk react after the results were announced?
After the announcement, Musk took to the stage and danced as investors chanted his name.
After the votes were counted, he expressed his victory and expressed his gratitude to shareholders. He said he was “very grateful” to shareholders.
“This is a great group of shareholders. I want them to hold on to Tesla stock,” Musk said.
“Other shareholder meetings are like snoozefests, but ours is a big deal. I mean, look at this. This is bad,” Musk said.
Musk has promised to begin production of a two-seater, steering-less robotaxis called the CyberCab in April. He also promised to unveil Tesla’s next-generation electric sports car, the Roadster.
He added that Tesla needs to acquire large-scale chip manufacturing capacity to support its transition to artificial intelligence (AI). To this end, the company may consider partnering with Intel, one of the world’s largest semiconductor companies.
Optimus, which the company unveiled as a prototype in 2022, is designed as an “autonomous humanoid robot” that performs “unsafe, repetitive, or tedious tasks.”
“What we’re embarking on now is not just a new chapter in Tesla’s future, it’s a whole new book,” Musk told a cheering crowd of officials.
What goals does Mr. Musk need to achieve in order to receive his reward?
To earn the pay package, Musk must meet a series of work goals.
This includes building 20 million vehicles and putting 1 million operational robotaxis on our roads over the next 10 years.
He must get 10 million people to sign up for the fully self-driving feature in Tesla’s cars.
It must also generate profits of up to $400 billion.
Another condition is that Tesla’s market valuation continue to rise beyond its current $1.5 trillion and reach set milestones starting at $2 trillion.
The valuation would then need to be increased nine times by $500 billion until the market valuation reaches $8.5 trillion by 2035.
The board’s proposal says Musk must “completely transform Tesla and society as we know it” and would receive a “zero” rating unless he achieves “incredibly ambitious” goals.
But a Reuters analysis weighed Mr. Musk’s performance goals against insights from more than a dozen experts and found that he could still be paid more than $50 billion to meet just some of the board’s goals.
The deal also ties Musk to Tesla for the next 10 years.
The proposal was controversial, with some investors objecting to its size. However, Tesla’s board warned that if the vote did not pass, Musk could leave the company.
Board members said the 75% vote in favor of the toll agreement was a sign of investors’ confidence in Musk’s long-term leadership, and he has ambitions to move further into the AI field, particularly the advancement of the Optimus robot, announced in 2022 and designed as an “autonomous humanoid robot” to perform “unsafe, repetitive or tedious tasks.”
Other investors have expressed doubts about moving to AI rather than focusing on electric vehicles. “Let me give you a deep understanding of where Musk’s head is. His ‘new book’ vision starts with Optimus,” Gene Munster, a managing partner and analyst at Deepwater Asset Management, said in a post on X.
Who were the major investors who opposed this deal?
Major investors who opposed the deal include Norway’s sovereign wealth fund Glass Lewis and Institutional Shareholder Services.
Norway’s sovereign wealth fund (Norwegian Government Pension Fund) held 1.14% of Tesla shares as of June’s semi-annual report.
Glass Lewis is a corporate governance research and proxy advisory firm headquartered in California, and Institutional Shareholder Services is a corporate governance and responsible investment solutions firm headquartered in Maryland.
Will Mr. Musk be paid in cash or another form?
Mr. Musk will not receive cash or a salary under this salary agreement. In exchange, he will receive up to 423.7 million additional Tesla shares.
