A new pay package proposed by Tesla Inc (NASDAQ:TSLA) could significantly increase the wealth of CEO Elon Musk, but also comes with milestones and incentives that would reward the company and shareholders along the way.
Freedom Capital Markets Chief Market Strategist Jay Woods compares the new pay package to the world of sports.
Musk Pay Package
Woods told Benzinga recently that Musk's pay package based on milestones would be similar to an NFL player getting paid only based on milestones and incentives.
"Imagine you are Patrick Mahomes and you're not gonna get a salary," Woods told Benzinga.
Woods said Musk's pay package would be similar to Mahomes not getting a salary, but instead only getting paid if his team makes the NFL Playoffs, wins playoff games and wins Super Bowls.
"This is the Elon Musk package, but it's in financial terms."
While some athletes have incentives tied to individual statistics and reaching the postseason, the majority of contracts include a high salary with incentives that provide a bonus. Musk's pay package is entirely incentive- and milestone-based.
Woods couldn't help but recall that Musk has a history of hitting past pay package milestones set before him.
"He's hit the financial metrics of making this company hit all these milestones."
The market expert said that Musk moving away from work with the White House to focus on Tesla could help the company hit future milestones.
Woods highlighted the robotics and AI stories for Tesla, and those are the key metrics that Musk will likely focus on and could hit in the coming years. The market strategist said it could be the electric vehicle milestones that Musk struggles to hit in his pay package.
During the interview, which was conducted when Tesla stock was trading closer to $424, Woods couldn't help but point out that shares of the EV company had "technically broken out."
Woods said Tesla stock has a history of running to new all-time highs when shares have a technical breakout.
"This is a beautiful breakout."
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Pay Package Pushback
Musk's new pay package could be worth up to $900 billion in Tesla stock if all milestones and incentives are hit over the next 10 years.
The milestones include Tesla's market capitalization, adjusted EBITDA, vehicle deliveries, FSD subscribers, robotaxis in commercial service and humanoid robot deliveries. Musk must also stay with Tesla for at least seven and a half years to be able to cash out his shares. A CEO succession plan from Musk must also be approved by Tesla's board of directors.
Many of the milestones are aggressive, including Tesla needing to hit a market capitalization of $8.5 trillion to reach the highest market cap milestone incentive.
Musk's pay package has received criticism from multiple people, including New York State Comptroller Thomas DiNapoli. In a statement, DiNapoli described the pay package, which could make Musk the first trillionaire, as "excessive."
Sen. Bernie Sanders (I-Vt.) has also spoken out about Musk's pay package, saying it is "grossly immoral."
The pay package has also generated attention from Pope Leo XIV, who voiced concern that Musk becoming a trillionaire could widen the global income gap.
Tesla's Board of Directors has voiced support for the pay package and highlighted the strong returns Tesla stock has had under Musk's leadership.
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Image created using artificial intelligence via Midjourney.
