Tesla's board has approved a new, highly ambitious compensation package for CEO Elon Musk, described as a "Super Ambitious Incentive Package for a Pioneering, Ambitious and Unique CEO." This plan, sometimes referred to as a massive $1 trillion plan over 10 years and estimated by executive compensation research firm Equilar to include a total 2025 compensation worth over $113 billion, is designed to retain Musk and transform the company into an artificial-intelligence and robotics powerhouse.

The board's rationale for such a package stems from a belief that Musk is the only individual capable of unlocking Tesla's full potential, particularly in the fields of AI and robotics. Negotiations for the package were extensive, involving 37 meetings with lawyers and 10 direct meetings with Musk over seven months. Key non-negotiable demands from the idiosyncratic CEO included owning 25% of the company, control over Tesla's future direction, and full compensation for a 2018 pay package that was voided by a Delaware court. Musk had previously threatened to leave, and the board expressed concerns that the company's critical AI talent might follow him.

The compensation plan includes an immediate grant of 96 million shares of restricted stock, valued at over $31 billion, which will vest over the next two years. These shares cannot be sold for at least five years and serve as partial payback for the $56 billion 2018 pay plan. The board explicitly stated there would be no 'double dip' if Musk wins in court regarding the previous package. The new plan involves a grant of up to 423.7 million performance-based restricted shares, representing approximately 12% of Tesla's current shares, divided into 12 equal tranches over a 10-year period.

Achieving these tranches is tied to specific, ambitious milestones. There are 12 market-capitalization targets, beginning at $2 trillion and progressing with nine $500 billion increases, culminating in two $1 trillion milestones, aspiring to a total market capitalization of $8.5 trillion. These targets must be sustained over both a 30-day and a six-month trailing average market value. Additionally, the plan sets 12 operational milestones, such as rolling out robotaxis, developing new robots, and raising profits as measured by adjusted EBITDA.

Product-specific goals are also highly demanding, including the delivery of 20 million total Tesla vehicles, securing 10 million paid Full Self-Driving (FSD) subscriptions on average over three consecutive months (excluding free trials), delivering 1 million "Bots" (AI robots like Optimus) counted from the September 3, 2025, grant date, and deploying 1 million driverless robotaxis in commercial service on average over three successive months.

Once a tranche's goals are met, Musk earns the ability to vote the awarded shares. However, the shares do not vest—meaning they are fully in his control and could be sold—until 7.5 or 10 years after September 3, 2025, the program's start date. Musk must remain in an approved executive role, such as CEO, at the time of vesting to receive the shares. Forfeiture conditions dictate that any goals not met by the end of the 10-year program result in the associated awards being forfeited, and if Musk ceases to serve in an approved role, all unvested shares are also forfeited, with exceptions for certain qualifying terminations or a change in control.

This pay plan, the largest ever for a CEO according to Equilar, is widely expected to gain shareholder approval, despite likely legal challenges. Equilar Research Director Courtney Yu noted that Tesla's shareholders have historically approved such grants, predicting "tremendous value" if Musk is successful. While Vanguard and BlackRock supported Musk's previous $56 billion pay package, State Street funds voted against it. The plan faces considerable pressure and criticism, with union figures like Randi Weingarten, president of the American Federation of Teachers, urging shareholders to reject Musk’s "money grab" and restore corporate governance standards. Kristin Hull of Nia Impact Capital deemed the package irresponsible, suggesting the funds could be better allocated to R&D or acquisitions. Investment analyst Dan Coatsworth called the plan excessive, questioning Musk's value given Tesla's recent challenges in the EV market and his tarnished brand, and highlighting investor worries about the company's deteriorating electric vehicle business and rising foreign competition. If approved, Musk, who currently controls close to 13% of the company, would own 25% provided he meets performance targets and remains for at least seven more years, potentially making Tesla the most valuable company in the world with an aspirational market capitalization of $8.5 trillion, surpassing Microsoft, Meta Platforms, and Alphabet combined, today.