Elon Musk‘s Compensation and Tesla‘s Challenges
Elon Musk is seeking a new compensation package from Tesla that could possibly make him the world’s first trillion-dollar man, but faces significant hurdles in achieving the milestones required to unlock its full value. The proposed plan is slated for a shareholder vote on November 6th.The package is structured around Tesla’s market capitalization reaching enterprising targets. to initially receive shares equivalent to 1% of the company, Tesla’s value would need to double to $2 trillion. Fully realizing the package, and reaching trillion-dollar status for Musk, would require a market value of $8.5 trillion – exceeding even current market leader Nvidia.
Beyond market cap, the plan hinges on substantial growth in Tesla’s core business. This includes reaching 20 million vehicle sales, nearly tripling the company’s total sales since its founding. Significant expansion is also required in Tesla’s nascent robot and robotaxi ventures,with goals of selling one million robots and one million driverless cabs. The robotaxi rollout is currently behind competitors like Waymo.
Musk would also need to remain CEO for at least seven and a half years to begin cashing out stock, and ten years to receive the full amount. This comes after a tumultuous period regarding his previous compensation. A $44.9 billion pay package, previously restored by shareholders after being initially revoked by a Delaware judge, was revoked again late last year, and Tesla is currently appealing that ruling. A condition of later stages of the current plan requires Musk to develop a framework for his succession as CEO.
Tesla’s performance this year has been challenged. The stock is down 25% year-to-date, and quarterly profits have fallen from $1.39 billion to $409 million. revenue has also decreased, falling short of Wall Street expectations. These struggles are partially attributed to criticism surrounding Musk’s public alignment with former US president Donald Trump.
Specifically, Tesla has experienced a 40% sales decline in Europe following Musk’s association with a far-right political party in Germany.Concurrently, competition is intensifying from established Detroit automakers and, notably, Chinese manufacturer BYD, which has surpassed Tesla in market share, holding 1.1% of all car sales compared to Tesla’s 0.7% in July.
Despite these challenges, Tesla recently granted Musk a $29 billion stock grant, citing his “transformative and unprecedented” leadership, even acknowledging the negative impact of his recent political involvement on sales and stock price.Musk himself has stated the need for increased shares and control to protect against potential ousting by shareholder activists.
Despite the ongoing concerns,Tesla’s stock saw a 2.5% increase in midday trading following the announcement of the proposed compensation package.
