The front-running EV company, Tesla, has disclosed in a recent financial filing a new pay plan for Chief Executive Elon Musk. This intends to rain Musk with loads of shares while enhancing his stranglehold on the company. This provision comes as Tesla continues its ascendancy in the fields of EV and robotics, with bold aspirations. At the same time, Tesla is asking its shareholders if xAI, the artificial intelligence (AI) initiative of Musk, should be financed by the company. Here’s an in-depth analysis of that proposal and what it portends for Tesla and its shareholders.
What’s in Musk’s new pay plan?
The renewed pay package is designed so that it keeps him very motivated but also in line with the long-term success of Tesla. It’s 12 tranches of shares, so he gets paid 12 times over if these milestones are hit within a 10-year period. The milestones are not easy ones to achieve since they encompass both financial as well as production targets.
- For one, it will need an almost doubling of its value at the present level to $2 trillion for the unlocking of the first set of shares.
- Also, a cumulative total vehicle production and delivery number by the company would be 20 million.
These are bold targets and show a hint of confidence in its growth that Tesla has under Musk’s leadership.
Also, through the approximation, Musk’s voting shares in Tesla will be revived enabling him to have more control over the direction of the company in EVs, robotics, or any other novelties it may opt or pursue. Musk has been categorical that he wants to be more controlling by early 2024. This will help him bring that control.
Elon Musk is not just Tesla’s CEO but also the richest man on the planet and arguably the kingpin in its fortunes. Tesla’s board feels by giving Musk a fat pay packet, the commitment of Musk towards the company will stay intact by keeping him engaged amidst running several other ventures, like SpaceX (aerospace & defense) / The Boring Company (infrastructure & drilling) / Neuralink (health tech) and xAI: his AI firm which he’s merged recently with his social media platform X.
Rewarding Musk with Tesla performance-based pay will keep him glued towards the growth of Tesla. The proposed plan also represents Tesla’s ambition to be a leader in electric vehicles and expand into robotics and artificial intelligence.
Shareholder vote on xAI investment
Apart from the pay plan, Tesla is also asking its shareholders to vote on whether the company should make an investment in xAI—the artificial intelligence company spearheaded by Elon Musk. xAI is developing state-of-the-art artificial intelligence with its ultimate goal of fast-tracking human scientific discovery; quite in line with what Tesla aims at in autonomous driving and robotics. If this last proposal is also carried by the shareholders, it would strengthen the relationship between Tesla and xAI and thus more innovations related to, perhaps, self-driver cars among other technologies.
However, this contingency has raised some concerns. For example, since Musk is the owner of xAI, some investors may feel that this is just another avenue through which Musk can benefit from Tesla’s money. The Tesla board will have to reiterate to the shareholders that investing funds in xAI will benefit the company, and in the long run, them as well.
What this means for Tesla and investors
The new compensation program and likely financing of xAI represent bold moves by Tesla. Attaining a $2 trillion market capitalization and 20 million vehicle production is an incredibly ambitious goal but one that would firmly entrench Tesla’s leadership on the global stage in both automobile and technology. The attention that’s been put on robotics and AI indicates also that there is life for Tesla beyond just electric vehicles.
For investors, that’s both the beauty and the beast. To clarify, the giving of rewards to Musk would keep the magic alive because under his stewardship, the company reached unprecedented levels. Meanwhile, it’s letting Musk have greater voting power and investments in his other companies which many might not take kindly to because of the perceived conflict of interest.
Elon Musk is known for being a big thinker and a multitasking manager. Besides Tesla, companies he is steering at the moment include SpaceX aiming to revolutionize traveling into space, Neuralink pushing developments in brain-to-computer interfaces, and xAI taking artificial intelligence to the next levels. The involvement of Musk in so many different projects says much about his vision for the future but also has him spreading his time and attention across several businesses.
Tesla believes that compensation to Musk for bringing this great innovation to the company is fair. The remuneration mechanism provides a channel through which they can maintain Musk’s investment in the success of Tesla while allowing him a say in the company’s destiny.
Shareholder decision and the road ahead
Tesla shareholders are going to vote on the proposed pay plan and investment in xAI by which Musk would get his new compensation package and whether or not Tesla will deepen its ties with xAI as well as if investment in xAI should be pursued. Such growth is causing so much attention to be placed on just one man to take it to even greater heights.
This period is an exhilarating one for everyone associated with Tesla. The lofty goals of the company and stewardship of Musk may lead to some game-changing developments within EV, robotics, and AI. But, the next few months’ choices will really shape how things ‘work out’ here.
