Elon Musk's $878 Billion Tesla Package: How He Can Earn Billions Without Meeting Most Performance Goals

Musk stands to earn billions without meeting most goals in his Tesla compensation package.

Los Angeles:

When Tesla's board presented Elon Musk with corporate history's largest executive compensation package last September, they assured investors he would need to achieve "Mars-shot milestones" to earn $878 billion in Tesla stock over a decade.

The directors claimed Musk would need to "completely transform Tesla and society as we know it" through advancements in robotics, autonomous driving, stock value, and profits. Without meeting these "incredibly ambitious" targets, Musk would supposedly receive "zero" compensation.

However, a Reuters analysis involving more than a dozen experts in executive compensation, company valuation, robotics, and automotive trends reveals that Musk could collect tens of billions of dollars without achieving most of these lofty goals.

The analysis found he could potentially earn over $50 billion by meeting just a few of the board's less challenging targets that wouldn't necessarily revolutionize Tesla's business or products.

Remarkably, achieving only two of the easiest targets alongside modest stock growth would net Musk $26 billion—exceeding the combined lifetime earnings of the next eight highest-paid CEOs, including Mark Zuckerberg, Larry Ellison, Tim Cook, and Jensen Huang, according to research firm Equilar's analysis for Reuters.

Four automotive experts noted that Musk's vehicle sales goals are readily achievable. If Tesla averages 1.2 million car sales annually over the next decade—which is actually 500,000 fewer cars per year than Tesla sold in 2024—Musk would earn $8.2 billion in stock, provided Tesla's market value grows from $1.4 trillion to $2 trillion by 2035, a rate below long-term market averages.

Tesla recently launched lower-priced versions of its Model Y SUV and Model 3 sedan to address declining sales.

Six robotics and autonomous-driving experts who reviewed Musk's performance goals for Reuters observed that three product development targets are written so vaguely that Musk could receive substantial compensation without significantly improving Tesla's profitability.

Tesla and Musk did not respond to comment requests.

A Tesla board spokesperson stated: "The proposed pay package is actually worth zero to our CEO unless and until the shareholders see the value of the company nearly double and an operational milestone is met."

The compensation plan requires Musk to remain a Tesla executive for at least seven-and-a-half years to receive any stock compensation, though he would immediately gain voting rights for earned shares.

Musk wrote on his platform X last month that the package "is not about 'compensation,' but about me having enough influence over Tesla to ensure safety if we build millions of robots."

The board acknowledged in its proposal that Musk is "motivated by more than just conventional forms of compensation."

Each performance goal grants Musk 1% of Tesla stock if he also reaches valuation milestones between $2 trillion and $8.5 trillion.

One goal requires 10 million subscriptions to Tesla's "Full Self-Driving" software, which currently requires human supervision. The target doesn't demand true autonomous capability, only an "advanced driving system"—a term William Widen, University of Miami law professor specializing in autonomous driving, calls "made-up" with no industry-standard definition.

Autonomous-driving experts suggest the subscription target could be easily met by reducing the price from its current $8,000 upfront or $99 monthly fee. China's BYD, Tesla's main electric vehicle competitor, already offers similar technology for free.

"If I were Musk's personal employment lawyer, I would like these definitions," remarked Matthew Wansley, a Cardozo School of Law professor focusing on autonomous driving.

Another goal requires one million robotaxis "without a human driver in the vehicle." While seemingly stricter, four autonomous-vehicle experts noted this could be interpreted to allow for remote human control or supervision from the passenger seat—approaches Tesla already employs in its initial robotaxi test in Austin, Texas.

Musk's deal also targets one million robots, apparently referring to Tesla's Optimus humanoid robots. However, the goal doesn't specifically require "humanoid" robots and defines "bot" broadly as "any robot or other physical product with mobility using artificial intelligence."

"It's a totally vague formulation," said Christian Rokseth, analyst at market research firm Humanoid. "Investors are expecting a humanoid robot."

Achieving any two product goals within a decade, along with a $2.5 trillion valuation, would pay Musk $26.4 billion in stock. Meeting three targets with a $3 trillion valuation pays $54.6 billion.

This means Musk could earn enormous sums without delivering truly driverless Teslas—the transformative product he's promised for a decade.

Gene Munster, managing partner at Tesla investor Deepwater Asset Management, believes investors will ultimately hold Musk accountable for delivering revolutionary products: "If people start smelling there's something goofy here, he's in trouble."

Tesla's board has declared Musk the only person capable of transforming Tesla into an artificial intelligence powerhouse. During negotiations, they noted Musk raised the possibility of "prioritising other ventures" without an acceptable compensation agreement.

Corporate governance experts warn the board is taking a substantial risk by staking Tesla's future on one leader. Wei Jiang, vice dean at Emory University's business school, observed that Tesla's board has granted Musk a "monopoly" on Tesla's leadership, contrary to good corporate governance principles that require a "competitive and fluid market for CEOs."

Musk's most challenging performance targets likely involve profit metrics, which offer no room for interpretation. The board established eight profit goals ranging from $50 billion to $400 billion in earnings before interest, tax, depreciation, and amortization, compared to Tesla's 2024 earnings of $16.6 billion.

Tesla's EV business, which generates almost all its revenue, faces deterioration with aging models confronting intense competition. Even the new Cybertruck has underperformed.

However, Musk's compensation structure allows for massive payouts without meeting any profit targets. Every goal combined with market-value increases offers the same 1% stock reward. Thus, Musk receives identical compensation for meeting relatively easy vehicle sales and software subscription goals as he would for increasing earnings fivefold to $80 billion.

The board's valuation targets may prove much easier to reach than its profit goals.

Tesla could achieve a $2 trillion valuation with just 6.4% annual share growth over the decade following the board's September 3 pay package approval—below the S&P 500's 8.5% annual average over 30 years and less than half the Nasdaq's 13.2% average.

Morningstar analyst Seth Goldstein believes Tesla could easily reach $3 trillion or higher over a decade with average market performance, though he noted Tesla's current valuation already largely reflects "future products that don't exist today."

For Musk to earn the largest payouts offered by Tesla's board, Goldstein emphasized, "we're going to start having to see real products."

Kevin Murphy, University of Southern California finance professor and expert witness for Tesla in defending Musk's 2018 compensation package, acknowledged that the vehicle sales and $2 trillion valuation goals aren't "much of a stretch," but merely achieving these won't satisfy shareholders.

The "handful of billions" from lower-tier goals won't matter much to Musk, who Murphy believes cares more about historic technological achievements. Shareholders focus on the hardest goals and largest payouts because they believe only Musk can achieve them.

"Is it worth it?" Murphy asked. "Shareholders seem to think so."