Tesla put forth a new proposal on Friday that might cement Elon Musk’s role as electric vehicle manufacturers strive to keep their CEOs anchored as the race for artificial intelligence (AI) intensifies.
The proposal aims to allocate 423 million shares to Musk, potentially elevating Tesla’s market capitalization to a lofty $8.5 trillion if the company achieves a series of targets over the coming decade.
This pay package could be valued at about $1 trillion, further boosting Musk’s status as one of the world’s wealthiest individuals.
However, this proposal still needs the green light from Tesla’s shareholders, and it has sparked some concerns. Musk himself has expressed worries about the company’s focus lately.
The tech mogul, who also manages X, SpaceX, Neuralink, and The Boring Company, ventured into politics earlier this year, adding to his already busy agenda.
This political engagement has turned out to be quite costly for Tesla. The company’s stock price and revenue have seen declines, as Tesla became synonymous with Musk and his controversial cost-cutting measures.
Even after Musk stepped back from political activities to refocus on Tesla, the effects of his political maneuvers lingered. He found himself in a very public dispute with President Trump, who threatened to scrutinize Musk’s government contracts and subsidies.
On Friday, the Tesla committee emphasized the need to prioritize the company’s ongoing success and transformative growth, urging for dedicated focus on achieving the company’s vision.
Meanwhile, Musk’s previous pay package, originally estimated at around $56 billion, has been mired in legal challenges since a federal judge in Delaware objected to it last year.
This ongoing legal battle seems to have complicated negotiations with the board regarding Musk’s role in the company, particularly since the 2018 package included guarantees for “compensation for past services.” Musk has also sought a 25% voting stake in Tesla.
The board noted that Musk hinted he might explore alternative interests if he didn’t receive certain assurances, which adds a layer of complexity.
The new pay package would reportedly grant Musk about 12% of Tesla’s shares, enhancing his voting power to approximately 25% as necessary.
Dan Ives of Wedbush Securities described this move as crucial for steering the company during a pivotal time.
“I see this as a strategic decision by the board; Musk is Tesla’s most valuable asset… and with the AI revolution underway, this is a critical phase for the company,” he stated in a note on Friday.
Ives highlighted that the emphasis on AI influenced the board’s decision to secure Musk’s commitment. Though primarily known as an EV manufacturer, Tesla is increasingly pivoting towards AI and robotics, especially in the realms of self-driving vehicles and humanoid robots.
As tech firms vie for AI development, there’s fierce competition to attract top talent, sometimes offering multi-million-dollar salaries.
