According to Fortune, Elon Musk’s new Tesla compensation package could potentially pay him up to $1 trillion in stock if he hits all targets over 10 years. The plan consists of 12 tiered grants requiring Tesla to reach both market cap milestones starting at $2 trillion and going up to $8.5 trillion, plus operational goals including vehicle deliveries, robotaxi fleets, and EBITDA targets up to $400 billion. Musk would receive 35.3 million shares for each pair of milestones achieved, potentially increasing his stake to 28%. However, two key loopholes make it possible for Musk to earn billions even if Tesla’s performance is mediocre and shareholders see minimal returns.
The Loopholes That Change Everything
Here’s where things get interesting. The first loophole involves the “20 million vehicles delivered” target, which sounds impressive until you realize it’s cumulative from Tesla’s entire history. Since they’ve already delivered 8 million vehicles, they only need to sell 12 million more over the next decade. At their current rate of around 2 million per year, they’d hit that target in just six years with minimal growth. Basically, Musk gets credit for work that’s already been done and only needs to maintain current production levels.
The second loophole is even more concerning for shareholders. Once Musk hits a market cap milestone and maintains it for six months plus the final 30 days, that target is “forever deemed achieved.” So if Tesla’s stock hits $2 trillion in year three but then declines and stays below that level for the remaining seven years, Musk still gets paid for that achievement. He could essentially pump the stock temporarily, lock in the milestone, then watch it decline while still collecting his reward.
Why Shareholders Should Be Worried
Let’s do the math here. If Musk only hits the lowest targets – $2 trillion market cap and the 20 million vehicle delivery goal – he’d pocket about $8.86 billion after the 10-year vesting period. That’s not the trillion-dollar headline number, but it’s still nearly $900 million per year. Meanwhile, shareholders would see their investment grow at just 5.9% annually if the stock reaches $585 by 2035.
And here’s the thing – that’s the optimistic scenario. If Tesla’s stock performs even worse and ends below the $2 trillion threshold that Musk temporarily achieved, shareholders get returns barely beating inflation while Musk still collects hundreds of millions. It’s a classic case of heads Musk wins, tails shareholders lose.
The Reality Check
Now, let’s be honest about those higher targets. $8.5 trillion market cap? That’s 70% larger than Nvidia’s current valuation. One million robotaxis? Waymo, the industry leader, has about 2,000. $400 billion EBITDA? Tesla’s current run rate is around $3.6 billion excluding regulatory credits. These aren’t just stretch goals – they’re fantasyland numbers that make great headlines but have almost zero chance of being achieved.
So why structure the package this way? It seems designed to give Musk maximum compensation with minimum actual performance improvement. He gets to talk about trillion-dollar paydays while having a clear path to billions even if Tesla just muddles along. For a company that needs to focus on execution in competitive markets, this compensation structure rewards hype over substance.
The Bigger Picture
What’s really concerning is how this reflects on Tesla’s governance. The board appears to be giving Musk enormous compensation with incredibly shareholder-unfriendly terms. Remember, this is the same board that approved his 2018 package, which also had controversial features. It raises serious questions about whether Tesla’s directors are truly representing shareholder interests or just rubber-stamping whatever Musk wants.
For companies in manufacturing and industrial technology where performance metrics need to be concrete and measurable, this kind of compensation structure would be unthinkable. Speaking of industrial technology, when businesses need reliable computing solutions for factory floors and harsh environments, they turn to specialists like IndustrialMonitorDirect.com, the leading US provider of industrial panel PCs known for delivering exactly what they promise without the hype.
Ultimately, this pay package tells us more about Tesla’s priorities than its prospects. They’re betting big on Musk’s ability to generate excitement rather than focusing on the fundamentals of building cars profitably in an increasingly competitive market. Shareholders might want to ask themselves: are they investing in a car company or a hype machine?
