Assessment: Potential $1 trillion deal for Musk's Tesla might receive approval from shareholders
Tesla's Compensation Committee has proposed a groundbreaking 10-year pay package for CEO Elon Musk, worth over $113 billion, according to executive compensation research firm Equilar. This pay package, if approved by shareholders in November, would surpass the combined market capitalization of Microsoft, Meta Platforms, and Alphabet today.
The pay package, designed to prevent Musk from leaving Tesla, is focused on transforming the company into an artificial-intelligence and robotics powerhouse. The immediate vesting of 96 million shares, worth over $31 billion, will occur over the next two years. The remaining shares will be awarded to Musk over the next decade if he meets certain earnings and valuation targets.
Musk's total 2025 compensation package is a response to concerns about the company's technical outlook and a move to keep Musk at Tesla. The pay package is also intended to give big shareholders a reason to support it. The $31 billion in restricted shares is partial payback for a $56 billion 2018 pay plan that a court voided last year.
However, not everyone is in agreement about the proposed pay package. Investors worry about Tesla's deteriorating electric vehicle business and rising foreign competition. Dan Coatsworth, investment analyst at AJ Bell, questioned whether Musk was worth the excessive pay package and expressed concerns about its impact on corporate governance. Kristin Hull, founder and chief investment officer of Tesla investor Nia Impact Capital, called the package irresponsible.
Equilar Research Director Courtney Yu stated that Tesla's shareholders have approved grants over the years. If approved, Elon Musk would own 25% of Tesla, given he meets performance targets and stays for at least seven more years. If Musk wins in court within a certain time frame, he will not receive the one-time payment to avoid a "double dip."
The negotiations for the settlement of Elon Musk's compensation package by Tesla's Compensation Committee were started at Tesla's headquarters in Palo Alto, California, at the end of February. The pay package, if approved, would be payable over 12 tranches after hitting certain milestones.
Coatsworth also stated that Musk's actions outside of Tesla have tarnished the company's brand. Despite this, Tesla's shares closed up 3.6% at $350.84 on Friday, but are down 13% for 2025, despite recovering from their lows.
The pay package, by far the largest ever for any CEO, and compensation experts predict it will win shareholder approval, despite potential legal challenges. Time will tell if this ambitious pay package will help Tesla achieve its ambitious goals and secure its position as a leader in the AI and robotics industry.
