Tesla’s Billion-Dollar Bonus: How Musk’s TSLA Pay Package Rewards Minimal Performance

Elon Musk stands to pocket billions from Tesla's compensation plan - and he barely needs to move the needle to cash in.

The Low Bar Bonus

Tesla's board structured a pay package that triggers massive payouts for hitting what critics call 'laughably achievable' targets. The electric vehicle giant's growth metrics set the stage for one of corporate America's most generous compensation schemes.

Performance Theater

Market cap milestones and operational targets that would deliver windfall payments appear almost designed to be cleared with minimal effort. The structure ensures Musk collects life-changing money for what amounts to business-as-usual performance - because nothing says 'incentive' like getting paid for showing up.

Another masterclass in corporate governance where the board plays Santa while shareholders foot the bill.

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In addition, some of Musk’s performance goals are loosely defined, which could allow for big payouts without delivering on the promises investors might expect. For example, one goal calls for 10 million subscriptions to Tesla’s Full Self-Driving software, but doesn’t require it to be truly autonomous. Experts told Reuters that this goal could be met by simply lowering the price. Another target mentions putting one million robots into use, yet doesn’t specify that they must be humanoid, only that they use AI and have mobility.

Even Musk’s robotaxi goal, while it calls for no human driver, could allow for remote or passenger-seat control, much like Tesla’s early tests in Austin, Texas. Nevertheless, while some goals seem easy, others are much tougher. For instance, Musk WOULD need to grow Tesla’s profits from $16.6 billion in 2024 to as much as $400 billion, a level that many experts believe is far more challenging than just raising the company’s market value. Still, many investors believe that Musk is uniquely capable of transforming Tesla into an AI and robotics powerhouse, and are willing to bet on him despite the risks.

What Is the Prediction for Tesla Stock?

Turning to Wall Street, analysts have a Hold consensus rating on TSLA stock based on 14 Buys, 13 Holds, and nine Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average TSLA price target of $352.94 per share implies 18.1% downside risk.