Tesla has announced a unique new compensation plan for CEO Elon Musk that would keep him at the company for the next 10 years.
The package is entirely contingent on achieving market cap and operational milestones that would make Tesla one of the most valuable companies in the world. In order to fully vest, Tesla’s market cap would have to grow to $650 billion (an increase of almost $600 billion), and important revenue and profitability goals would also have to be achieved.
Musk is not guaranteed compensation of any kind – no salary, no cash bonuses, and no equity that vests simply by the passage of time. Instead, Musk only compensation will be a 100% at-risk performance award, which ensures that he will be compensated only if Tesla and all of its shareholders do well.
The performance award consists of a 10-year grant of stock options that vests in 12 tranches. Each of the 12 tranches vests only if a pair of milestones are both met. To meet the first market cap milestone, Tesla’s current market cap must increase to $100 billion. For each of the remaining 11 milestones, Tesla’s market cap must continue to increase in additional $50 billion increments. For Musk to fully vest, Tesla’s market cap must increase to $650 billion.
The plan ensures that Musk will continue to lead Tesla 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,” the company said in a release.