The shareholders of the electric car maker Tesla (Nasdaq: TSLA) have approved a historic $1 trillion payout for the company’s CEO, Elon Musk, who also happens to be the world's richest man.

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$1 Trillion Pay Plan for Elon Musk

The payout proposal was approved by a majority of 75 per cent of Tesla shareholders in the company’s annual general meeting yesterday (Thursday). Musk, who currently holds about 13 per cent of the company’s stake, and his brother, Kimbal, who also serves on Tesla's board, were allowed to vote on the pay package.

However, the $1 trillion pay package is not just another handout; rather, Musk has to fulfil specific ambitious targets to receive the highest executive pay package in history, which would also make him the first dollar trillionaire.

The payout is split into 12 tranches of stock options that vest, each of which will be unlocked upon meeting specific financial and operational goals.

The key milestones Musk must achieve for the $1 trillion payout are:

  1. The payout will start when Tesla’s valuation climbs in steps, beginning at $2 trillion and ultimately requiring about $8.5 trillion for full vesting. Tesla’s current market cap is $1.54 trillion.

  2. The operational goals include the delivery of 20 million Tesla vehicles cumulatively over the decade, a volume more than twice the company’s total output of the prior dozen years.

  3. He also needs to put 1 million robotaxis into commercial operation and deploy 1 million humanoid robots (Optimus).

  4. He further needs to achieve up to $400 billion in “core profits” over the period, included among the plan’s financial hurdles for vesting.

The Future of Tesla Is Beyond Cars

Musk will receive the payout in the form of stock options, which would increase his stake in the company to around 25 per cent.

“What we're about to embark upon is not merely a new chapter of the future of Tesla, but a whole new book,” Musk said after taking the stage in Austin, Texas, and dancing to the chants of his name. “Other shareholder meetings are snoozefests, but ours are bangers. Look at this. This is sick.”

However, not all the major Tesla shareholders were in favour of Musk’s massive pay package. Several major institutional investors, including Norway's sovereign wealth fund and the California Public Employees' Retirement System (CalPERS), rejected the pay package.

The Tesla board, on the other hand, argued that if the pay package was not approved, Musk might leave the company, and it could not afford to lose him at this stage.

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Meanwhile, the $1 trillion pay package is not the first exorbitant pay package Musk has received at Tesla. His earlier compensation deal of $56 billion was challenged in court by several Tesla shareholders, despite his delivering extraordinary targets for the company.

Source: Finance Magnates