Tesla CEO Elon Musk previously said that he might not remain the automaker’s chief executive after they reach volume production of the Model 3, but those plans have now apparently changed.
The automaker’s board of directors has submitted a new 10-year compensation plan for Musk today and it would see him become the richest man on earth if he reaches all the goals in the plan.
The board, aside for Musk and his brother who recused themselves, have been working on this plan for the past 6 months and they are now bringing it to a vote.
They built on top of Musk’s previous compensation plan that was based on reaching milestones and being awarded tranches of stock options for each.
Several of those milestones were based on Tesla achieving a larger market capitalization and they reach the last of those milestones – $43 billion – last year.
The new compensation plan is also based on Tesla increasing its market cap and it would need to increase to $650 billion for all of Musk’s stock options to vest:
It is also linked to a significant increase in revenue and adjusted EBITDA as seen in the chart above.
Each $50 billion increase would result in Musk receiving 1.69 million shares, which is currently worth about $600 million at today’s price, but if they fully vest, it would increase Musk’s stake in Tesla to around 30% – making him the richest man in the world through his stake in the automaker.
The board wrote about the proposal:
“For vesting to occur when the milestones are met, Elon must remain as Tesla’s CEO or serve as both Executive Chairman and Chief Product Officer, in each case with all leadership ultimately reporting to him. This ensures that Elon will continue to lead Tesla’s management over the long-term while also providing the flexibility to bring in another CEO who would report to Elon at some point in the future. Although there is no current intention for this to happen, it provides the flexibility as Tesla continues to grow to potentially allow Elon to focus more of his attention on the kinds of key product and strategic matters that most impact Tesla’s long-term growth and profitability.”
They are aiming for a shareholders vote on February 7, 2018
As Tesla’s biggest shareholder, Musk always said that he would forever remain with the company, but he did sometimes say that he was thinking about stepping back from his CEO role, which he has maintained since 2009.
The goal of this new plan appears to aim to incentivize him to keep the CEO role for another 10 years.
At first glance, it’s an extremely generous compensation plan that would result in some significant dilution for shareholders, but it would be hard for them to complain since Musk wouldn’t receive anything (he doesn’t take any salary from Tesla) if he doesn’t deliver an insane increase in market capitalization for those shareholders.
The insane increase might appear unachievable, but many said the same thing about the similar increase in his previous performance award plan and that happened – so who knows.
What do you think? Let us know in the comment section below.
FTC: We use income earning auto affiliate links. More.
Subscribe to Electrek on YouTube for exclusive videos and subscribe to the podcast.