Trillion $ Payday for Elon
Tesla CEO Performance Awards: 2018 and 2025 Compared
2018 Lawsuit
In 2018, a class-action lawsuit was filed against Elon Musk and Tesla's board, alleging breaches of fiduciary duties for approving Musk's stock-based compensation plan.
On June 4, 2018, a purported Tesla stockholder filed a putative class and derivative action in the Delaware Court of Chancery against Elon Musk and the members of Tesla’s board of directors as then constituted, alleging corporate waste, unjust enrichment and that such board members breached their fiduciary duties by approving the stock-based compensation plan awarded to Elon Musk in 2018. Trial was held November 14-18, 2022. Post-trial briefing and argument are now complete.
The 2018 CEO Performance Award
In March 2018, our stockholders approved the Board of Directors’ grant of 20,264,042 stock option awards to our CEO (the “2018 CEO Performance Award”). The 2018 CEO Performance Award consists of 12 vesting tranches with a vesting schedule based entirely on the attainment of both operational milestones (performance conditions) and market conditions, assuming continued employment either as the CEO or as both Executive Chairman and Chief Product Officer and service through each vesting date.
Each of the 12 vesting tranches vests upon certification by the Board that both:
- The market capitalization milestone (starting at $100 billion, increasing by $50 billion increments).
- One of the following operational milestones (revenue or Adjusted EBITDA).
| Total Annualized Revenue (in billions) | Annualized Adjusted EBITDA (in billions) |
|---|---|
| $20.0 | $1.5 |
| $35.0 | $3.0 |
| $55.0 | $4.5 |
| $75.0 | $6.0 |
| $100.0 | $8.0 |
| $125.0 | $10.0 |
| $150.0 | $12.0 |
| $175.0 | $14.0 |
The 2025 CEO Performance Award
In November 2025, Tesla shareholders approved a new performance-based compensation package for Elon Musk, potentially worth up to $1 trillion over the next decade if the company achieves ambitious market capitalization, operational, and innovation milestones. This unprecedented deal, the largest in corporate history, ties Musk's rewards directly to Tesla's growth into an $8.5 trillion enterprise focused on AI, robotics, and energy. It includes requirements for Musk to develop a CEO succession framework and imposes long vesting periods (7.5–10 years) plus a five-year post-vesting hold.
If Telsa meets all metrics within this plan, investors will benefit from incremental value creation of $7.5 trillion from the current approximate valuation of $1 trillion. The cost (dilution) of ~10% is more than outweighed by the value created. Correspondingly, as the company meets the performance metrics of each milestone in the plan, in our view, the value creation for shareowners far outweighs the incremental equity award to Elon Musk for each tranche of compensation.
The award offers up to 423.7 million shares, divided into 12 tranches, each tied to rigorous market capitalization and operational milestones.
The award includes 12 distinct operational, product, and financial milestones, such as cumulative vehicle deliveries, paid Full Self-Driving (FSD) subscriptions, and deployment of Optimus robots and robotaxis. These are tangible, measurable outcomes that reflect real business execution and innovation.
Shares earned before year 5 vest only after 7.5 years, and those earned after year 5 vest at year 10.
Even after vesting, shares must be held for an additional 5 years.
To earn the final two tranches of the award, Elon Musk must collaborate with the Board to establish a long-term CEO succession plan.
If all tranches are earned and vested, Elon Musk's ownership could rise to approximately 24-29%.
Critics of the 2025 Tesla Performance Award often overlook the simple fact that this exact model of incentive compensation has already proven itself twice over. The 2018 plans were derided in almost identical terms ("excessive," "outsized") yet both drove extraordinary shareholder returns. The 2012 package, contingent on a tenfold increase in market capitalization, was achieved years ahead of schedule. The 2018 award, which ISS and Glass Lewis have criticized, required Tesla to grow from roughly $50 billion to $650 billion in market cap; growth that was accomplished within only four years, creating hundreds of billions of dollars in shareholder wealth. In both cases, the dilution effect was minimal compared to the immense value creation for investors. Far from a windfall, these awards functioned as pure pay-for-performance mechanisms: Musk only benefited when shareholders benefited first.
The same dynamic underpins the 2025 award. The milestones are extraordinarily demanding as they require Tesla to become an $8.5 trillion enterprise and to achieve operational breakthroughs in autonomy, robotics, and energy storage. For shareowners, this represents an upside bet: as Tesla achieves each of the targets in the plan, investors enjoy a significant gain in value. This is not moral hazard, it's alignment. Those who claim the plan is "too large" ignore the scale of ambition that has historically defined Tesla's trajectory. A company that went from near-bankruptcy to global leadership in EVs and clean energy under similar frameworks has earned the right to use incentive models that reward moonshot performance.
| Market Value milestones (in trillions) | Operational milestones |
|---|---|
| $2 | 20 million vehicles delivered |
| $2.5 | 10 million active FSD subscriptions |
| $3 | 1 million robots delivered |
| $3.5 | 1 million robotaxis in commercial operation |
| $4 | $50 billion adj. EBITDA |
| $4.5 | $80 billion adj. EBITDA |
| $5 | $130 billion adj. EBITDA |
| $5.5 | $210 billion adj. EBITDA |
| $6 | $300 billion adj. EBITDA |
| $6.5 | $400 billion adj. EBITDA |
| $7.5 | CEO succession plan |
| $8.5 | CEO succession plan |
Comparison to Other Tech CEOs
Musk's 2025 package stands in stark contrast to typical tech CEO compensation, which relies heavily on annual stock awards and incentives but rarely approaches such long-term structures. In fiscal 2024, the median total compensation for S&P 500 CEOs was $16.8 million, with tech sector CEOs averaging $19.3 million. This figure rose modestly in 2025 amid AI-driven stock gains, but even top earners remain orders of magnitude below Musk's potential trillion-dollar award.
Tech CEO pay often includes a base salary of $1–3 million, plus bonuses and equity vesting over 3–4 years, tied to shorter-term performance. Musk's deal, by comparison, demands sustained decade-long execution, aligning with Tesla's "moonshot" ambitions.
The table below compares Musk's 2025 package to select tech CEOs based on 2024–2025 realized or granted compensation.
| CEO | Company | Compensation Type | 2024–2025 Value (USD) | Key Components | Vesting/Hold Period |
|---|---|---|---|---|---|
| Elon Musk | Tesla | Performance stock options (2025) | Up to $1 trillion | 12 tranches; market cap to $8.5T; operational milestones (e.g., 20M vehicles, 1M robots) | 7.5–10 years vesting + 5 years hold |
| Satya Nadella | Microsoft | Annual stock awards + incentives | $97 million | $84M stock; $9.5M cash; $2.5M salary | 3–4 years |
| Jensen Huang | Nvidia | Stock awards + incentives | $50 million | $38.8M stock; $6M non-equity; perks | 3 years |
| Tim Cook | Apple | Stock awards + incentives | $75 million | $58.1M stock; $12M incentives; $3M salary | 3 years |
| Sundar Pichai | Alphabet | Stock awards + incentives | $226 million | Primarily equity tied to performance | 4 years |
| Median Tech CEO | S&P 500 Tech | Mixed (salary, bonus, equity) | $19.3 million | ~80% equity; short-term milestones | 3 years |
Sources: Equilar, AFL-CIO Paywatch, SEC company filings.
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