Will Tesla Make Elon Musk the World’s First Trillionaire?

Setting compensation for a CEO is a complex undertaking for any business.

For an EV manufacturer with the ambitious growth targets of Tesla, the challenge is magnified, particularly when the CEO is Elon Musk, whose wealth and influence already dominate the industry.

Tesla has proposed a compensation package valued at US$1tn, a figure that if approved, would represent the largest corporate pay award in history.

The mammoth offer, which nears Tesla’s current market valuation, follows Tesla's recent Master Plan IV announcement.

This high-level strategy outlines a vision for creating Sustainable Abundance and positions Tesla as a leader in transforming mobility and delivering sustainable energy, a mission intrinsically linked to its EV operations.

Elon Musk’s mammoth pay package hinges on meeting a series of demanding targets over the next decade.

These include lifting Tesla’s valuation nearly eightfold to about US$7.5bn, selling an additional 12 million vehicles and hitting milestones in AI, robotaxis and humanoid robots, a product Musk has suggested could one day account for 80% of Tesla’s worth.

Under the plan, Musk will take no salary or cash bonuses.

Instead, his compensation will be entirely performance-based, awarded in 12 tranches of shares tied to 12 market milestones.

The first is reaching a market capitalisation of US$2tn. The next nine require an extra US$500bn each, while the final two demand US$1tn apiece.

If Tesla’s valuation fails to double within 10 years, Musk will receive nothing.

Justifying the innovation incentive

In a filing with the US Securities and Exchange Commission on 5 September, Tesla board members outlined the reasoning behind the offer.

Robyn Denholm, Board Chair and Audit Compensation Committee at Tesla, and fellow board member Kathleen Wilson-Thompson explained their position.

“Growth that may seem impossible today can be unlocked with new ideas, better technology and greater innovation,” they said.

"We believe that Elon’s singular vision is vital to navigating this critical inflection point.

"We also recognise the formidable nature of this undertaking and, as a result, the importance of having a leader who is not only willing and capable but eager to meet this challenge.”

They conclude their statement by adding, “Simply put, retaining and incentivising Elon is fundamental to Tesla achieving these goals and becoming the most valuable company in history.”

A risky gamble on leadership

Musk's often divisive public persona creates challenges for the EV maker.

His political engagements were cited by some analysts as a contributing factor to a 40% slump in European car sales for the manufacturer earlier this year.

In May, The Wall Street Journal reported that Tesla was considering replacing Musk due to his work with Donald Trump, claims that Tesla publicly stated are “absolutely false.”

The scale of the proposed pay package has received a mixed response,

Dan Coatsworth, an investment analyst at London-based stockbroker AJ Bell, says the package “beggars belief,” asking, “is one person worth that much?”

He says: “One minute Tesla’s board is wondering if Elon Musk is a liability to the company given his outspoken views and political distractions, the next they’re effectively saying ‘pick a number, any number’ to lock him in for as long as possible.”

This is not the first time a substantial pay deal for Musk has faced scrutiny.

A previous package from 2018, worth US$55.8bn, was annulled by a judge in the US state of Delaware in early 2024.

In a detailed 200-page ruling, Judge Kathleen McCormick described the deal as “unfathomable” and suggested that Tesla directors have been “swept up by the rhetoric” surrounding the CEO.