(Reuters) -Tesla's board has proposed a $1 trillion compensation plan for CEO Elon Musk in what would be the largest corporate pay package in history, underscoring the hold Musk has over the carmaker as it attempts to transform into an AI and robotics powerhouse.
The world's richest person has consistently said he needs more of a stake in the company, even as a legal battle over his 2018 pay package - then valued at a mere $56 billion - continues. The newly proposed award is roughly 18 times the size of the contested plan.
The plan highlights Tesla's reliance on Musk as it faces slowing EV demand, rising competition from Chinese rivals and pressure to deliver on its AI ambitions.
The regulatory filing puts Musk on a different plane than other technology executives, saying that "traditional compensation packages granted to executives at other companies were determined to not be appropriate for designing Mr. Musk’s incentive compensation."
Musk transformed Tesla from a niche EV startup into the world's most valuable automaker, scaling production, expanding globally and pushing the industry toward electric mobility.
Recently, however, Tesla has been losing ground to Chinese rival BYD and other automakers as EV demand softens and competition intensifies in key markets.
Supporters of Musk's enhanced pay package have argued that his compensation plans have aligned his incentives with long-term growth, while critics warn of potential dilution and governance risks.
"Mr. Musk has shown a troubling history of being easily distracted into other paths that don't necessarily directly benefit a company like Tesla," said Peter Anderson, founder of Andersen Capital Management.
The board said the new award could lift his stake significantly if all targets were met, giving him even greater control as Tesla seeks to become the world's most valuable company.
COMPENSATION DETAILS
The proposed plan would grant Musk up to 12% of Tesla's stock, worth about $1.03 trillion if the company hits its target market value of $8.6 trillion. The plan requires boosting Tesla's valuation nearly eightfold, or about $7.5 trillion, over the next decade.
If fully earned, the award would materially increase Musk's voting power from his roughly 13% stake, intensifying debate over governance and succession.
The board said the award would vest in tranches tied to both market capitalization and operational milestones, including mass production of robotaxis and humanoid robots.
Tesla emphasized that Musk would receive no salary or cash bonus, with all compensation linked to performance, echoing the structure of his 2018 plan.
The company's shares were up about 2% in premarket trading.
Tesla's board earlier this year approved an interim compensation package for CEO Elon Musk worth about $29 billion in restricted stock, designed to keep him at the helm through at least 2030 as the company pivots to an AI-first strategy.
Tesla has since reincorporated in Texas and is appealing the Delaware ruling, but the company said the new plan reflects shareholder feedback and stronger governance safeguards.
The filing also disclosed that a special committee of independent directors reviewed the proposal, which will go to a shareholder vote in November.
(Reporting by Akash Sriram and Shashwat Chauhan in Bengaluru; Editing by Anil D'Silva and Saumyadeb Chakrabarty)
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