Tesla's Near-Trillion Dollar Gamble on Musk: Power Play or Corporate Folly?

Tesla has unveiled a staggering performance-based pay package for Elon Musk potentially worth $1 trillion—a move that would dramatically increase his voting rights and control over the company.

This audacious plan hinges on Tesla hitting specific financial and market targets, which would reward Musk with up to $975 billion through stock grants, substantially increasing his ownership stake. I’m concerned this essentially consolidates his power within the company, raising serious questions about corporate governance and shareholder protections.

The proposal follows July’s $29 billion restricted stock grant to Musk, intended as a temporary fix after a Delaware judge invalidated his 2018 compensation package worth over $50 billion. Tesla’s board claims this new package is essential to keep Musk focused amid growing competition in EV and AI markets.

Musk would receive no salary or cash bonus—just 423 million shares if Tesla achieves seemingly impossible targets: an $8.5 trillion market cap, 20 million cars delivered, 1 million robotaxis and Optimus bots, and $400 billion in EBITDA within a decade. This arrangement feels designed to give him near-dictatorial control over strategic decisions while limiting other shareholders’ influence.

In what seems like an obvious conflict of interest, shareholders will also vote on whether Tesla should invest in xAI, Musk’s AI startup founded in 2023. While Tesla has incorporated some xAI technologies, direct financial entanglement between Musk’s various ventures seems problematic at best.

Tesla stock jumped 2.7% following the announcement, trading at $347.5, though it remains down 13.9% year-to-date as EV demand slows and Chinese competitors like BYD gain ground. Tesla’s struggling in India where its Model Y costs a prohibitive $69,751, and in China where it commands just 4% market share compared to BYD’s 29%.

If approved, this would be America’s largest executive compensation package ever. The board insists Tesla would benefit if Musk meets these targets, claiming resulting stock growth would offset dilution from new grants. But I wonder: is this really about Tesla’s success, or just Musk’s ego and control?