Tesla (NASDAQ: TSLA) shareholders approved what could become the largest executive compensation package in corporate history. If Elon Musk achieves every performance target over the next decade, the award could eventually be worth roughly $1 trillion. Many criteria must be met before the award is given, and one number stands above all the others: $8.5 trillion.
That's the market capitalization Tesla must reach for Musk to earn the maximum stock award under the new compensation plan. This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia.
For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue » To put that in perspective, Tesla is currently worth roughly $1.34 trillion, meaning the company would need to grow by roughly 635% to hit the final valuation milestone. Indeed, that may sound unrealistic, but it's important to understand how the package works.
Unlike a traditional salary or cash bonus, Musk only earns these bonus shares if Tesla meets a series of performance hurdles. Those include market capitalization targets as well as additional operational milestones designed to ensure the company's financial performance keeps pace with its valuation. This structure will reward shareholders, assuming Tesla becomes dramatically more valuable.
So this is less about whether Musk deserves the compensation and more about whether these incentives encourage decisions that increase long-term value. Supporters argue they do. If Tesla reaches an $8.5 trillion market value, shareholders will own a slightly smaller piece of the company, but it would be a much more valuable company.
That's the trade-off built into the compensation plan. But critics see it differently. They argue that the targets place too much emphasis on market capitalization, which can be influenced by investor sentiment as much as business fundamentals.
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