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Journalism of Courage
Earlier this week, American automotive and clean energy company Tesla announced that its shareholders have voted in favour of CEO Elon Musk’s almost $1 trillion pay package with 75 per cent support among voting shares.
Reportedly, Musk will only get the full payout if Tesla accomplishes very ambitious targets. These targets include the company’s value to reach around $8.5 trillion from its current $1.4 trillion. Millions of vehicles sold annually including robot-taxis and humanoid robots over a multi-year period. And, most importantly, Musk remains the CEO for many years ensuring that the company takes action on this grand vision.
Now, if everything goes according to plan, the 54-year-old billionaire becomes one of the highest-paid executives in history. While the total could be up to $1 trillion, according to Reuters after deductions it would be about $878 in net terms.
The pay package has also raised some concerns. The astronomical figure is definitely unprecedented and many feel that it may accord Musk massive control over Tesla. Some major investors are apprehensive about dilution of their shares and the entire organisation depending on one person. On the other hand, some feel the goals are extremely optimistic such as exponential sales of robot taxis, humanoid robots, and hitting $8.5 trillion market cap. It is still unclear if the company can attain these goals.
With this it seems Tesla is signalling its plans to go much beyond electric cars. It is now betting big on AI, robotics, and automated services. Musk is getting the highest salary on the planet, but only if Tesla delivers on major growth and transformation. This also shows that shareholders are betting that Musk has the potential to lead Tesla into a new era of transformation, much beyond its current scope. On the other hand, for investors, they worry about what if Tesla fails to deliver on the lofty targets. This could result in slightly low pay out, but the deal being so large could impact how the company is run.
Indeed this is one of the most extreme examples of how CEO pay is tied to long-term goals, instead of short-term performance.
All of this seems great for Tesla, as not long ago, the company suffered a severe dent in sales owing to Musk’s complicated relationship with the US president, Donald Trump. The billionaire not only funded Trump’s presidential campaign but also led to massive job cuts after he was announced to lead the Department of Government Efficiency or Doge. This further led to the dwindling appeal of Tesla cars among left-leaning consumers.
Reportedly, there were signs of decline from much earlier, as Tesla faced a steep decline after Musk acquired Twitter, now X, in 2022. Market research showed declining sentiment toward the brand, and analysts described Tesla as facing a “brand tornado crisis.” Although competition from Chinese EVs plays a role, Musk’s actions have evidently impacted Tesla’s reputation.
It needs to be noted that the $1 trillion figure isn’t real, at least not yet. Tesla shareholders re-approved Musk’s old $56 billion stock-option plan from 2018. The $1 trillion number just shows what his shares could be worth someday if Tesla’s value soars that high, it’s not an actual payout.
