Tesla Moves Higher Pre-Market as Board Approves New Pay Package for Elon Musk

Tesla's stock (NASDAQ:TSLA) is trading 1.83% higher in the pre-market following the announcement of a proposed compensation package for CEO Elon Musk, potentially valued at $1 trillion. The market reacted positively to the news, viewing it as a strong commitment to Musk's continued leadership and Tesla's ambitious long-term goals.

The proposal aims to incentivize Musk to drive Tesla towards significant milestones over the next decade. The market's initial response reflects a belief that retaining Musk is crucial for Tesla's future success, particularly as the company intensifies its focus on artificial intelligence and autonomous technology.

The proposed compensation package is intricately tied to Tesla achieving ambitious performance targets. To unlock the full value of the package, Tesla's market capitalization must increase from its current $1.09 trillion to $8.5 trillion.

Furthermore, the plan requires substantial growth in vehicle sales, the successful launch of a robotaxi network, and the development of advanced AI-powered robots. Financial targets are equally demanding, with adjusted earnings needing to rise from $16.6 billion to $400 billion.

Under the terms of the agreement, Musk will not receive a salary or cash bonus but will be granted stock options as these milestones are met.

The board has also requested shareholders to vote in favor of a $29 billion interim compensation plan for Musk. This plan, consisting of restricted stock, is designed to ensure Musk's continued leadership through at least 2030, aligning with Tesla's strategic pivot towards AI and robotics. The shareholder vote is scheduled for November 6, 2025, and its outcome will be a critical factor in shaping investor sentiment and Tesla's future direction.

This proposal arrives after a series of legal challenges to Musk's previous compensation agreements. In January 2024, a Delaware judge invalidated Musk's 2018 pay package, then valued at $56 billion, citing flaws in the approval process and concerns about board independence. Although shareholders subsequently voted to reapprove the package, the court upheld its decision in December 2024, maintaining that the process was “deeply flawed”. The new proposal seeks to address these concerns by directly linking Musk's compensation to the achievement of specific, measurable, and ambitious targets.

The market's reaction to the proposed compensation package has been mixed. Supporters argue that it aligns Musk's incentives with long-term shareholder value and is essential for Tesla's continued innovation and market dominance. Critics, however, contend that the magnitude of the package is excessive and raises concerns about corporate governance and the board's independence. The upcoming shareholder vote will serve as a key indicator of investor sentiment and the level of support for the new compensation structure.