Tesla’s 10-year plan: Firm must be worth $650 billion by 2028 or Elon Musk won’t get paid

Edward Munn January 24, 2018

Tesla has unveiled a new 10-year compensation plan for Elon Musk, confirming the company’s CEO will stay on in his current position for the foreseeable future.

Tesla’s 10-year plan: Firm must be worth $650 billion by 2028 or Elon Musk won’t get paid

Billionaire Musk doesn’t currently take a salary from Tesla. His financial rewards and compensation are entirely dependent on Tesla hitting its targets and succeeding as a business.

As a result, the “Performance Award” detailed in Tesla’s 10-year plan isn’t new, per se, but the company’s targets are undoubtedly much more ambitious this time around. In particular, Musk will only receive the maximum possible compensation if the company has a market value of $650bn at the end of the decade – around ten times the current figure – as well as revenues of $175bn.

“Elon will receive no guaranteed compensation of any kind — no salary, no cash bonuses, and no equity that vests simply by the passage of time,” the company announced. “Instead, Elon’s only compensation will be a 100% at-risk performance award, which ensures that he will be compensated only if Tesla and all of its shareholders do extraordinarily well.”

tesla-ceo-performance-award- Musk currently owns 13% of Tesla’s shares, worth around $13 billion. These aren’t at risk under the set up, but he will have to hit a combination of ambitious targets to acquire a further twelve “tranches” of shares, each corresponding to 1% of the company’s current outstanding shares. The first target market value is $100bn and this increases by $50bn for each target thereafter. At every stage, Musk must hit either a revenue or profit target, too.

The Financial Times commented that these targets are “so lofty they almost redefine ‘ambitious’”. This conclusion is especially understandable when you consider Tesla has struggled to make enough of its Model 3 electric vehicle.

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Musk claimed the company would be producing 20,000 of the electric vehicle a month by December, but thanks to “manufacturing glitches”, it produced only 2,425 in the last quarter of 2017.

The company has also never posted an annual profit. As I’ve pointed out, profit growth is not strictly necessary for Musk to make a considerable amount of money personally, providing he grows Tesla’s market value and revenue figures. However, it’ll be fascinating to see if the CEO is able to turn a profit and achieve the maximum payment from Tesla.