How do you pay the world’s richest man? Tesla’s board is about to decide

How do you pay the world’s richest man?

Elon Musk, who earned nothing from Tesla last year, was the lowest-paid CEO in the S&P 500. But the absence of a paycheque is hardly the whole story. His 2018 pay package—a controversial and ambitious all-stock plan—was twice struck down in court, despite support from shareholders. Now, with Tesla underperforming and Musk bouncing between companies and political interests, the automaker’s board is considering how to pay him again, the Wall Street Journal reported.

It’s not an easy problem: how do you reward the world’s richest man, who already owns about 20% of the company, in a way that pleases investors, passes legal scrutiny, and actually keeps him focused?

Musk’s pay dilemma: billions or nothing?

Since Musk’s 2018 stock grant was voided, Tesla’s board has been without a formal structure to reward or incentivize its CEO. That old grant allowed him to earn as much as $56 billion in shares, though none of it has legally vested following the court rulings. Now the board is trying to rework a plan that motivates Musk without repeating the legal pitfalls of the past.

Pay experts say a new package must strike a balance between simplicity, performance-based incentives, and clearer expectations around Musk’s role. That’s especially critical after his time-consuming political forays and focus on ventures like SpaceX, X (formerly Twitter), and AI start-up xAI.

Option 1: Go big, but make him show up

Alan Johnson of Johnson Associates believes Tesla should offer Musk a multibillion-dollar equity package—but only if he stays actively involved and drives results. The company, he argues, should tie any new deal to clear expectations around time commitment, value creation, and a long-term succession plan.

“There’s no point in putting out millions when for him that would be irrelevant,” Johnson said. Instead of complex, multi-tranche targets, he suggests Tesla offer stock awards based on outperforming the market or maintaining Tesla’s massive valuation. “It’s about value creation, not how many cars you sell.”

Option 2: Pay him like any other CEO

Others think Musk should be treated like a conventional chief executive, not a visionary founder. Robin Ferracone of Farient Advisors argues the board should focus on compensating him for his executive duties, not boosting his ownership stake.

“If he wants a bigger stake in the company, go buy it,” Ferracone said. One option: a co-investment plan that matches shares Musk buys himself—encouraging long-term alignment with investors.

Ferracone and other pay consultants suggest comparing Musk’s pay with peers like Mark Zuckerberg, Sundar Pichai, and legacy auto CEOs. Any new plan should reflect Tesla’s current stage as a maturing automaker and AI player, not just its early start-up roots.

Option 3: Pay him like everyone else

Rick Smith, CEO of Axon and 2024’s highest-paid S&P 500 executive, took a different route: tying his $165 million award to the same equity plan offered to all 4,000 Axon employees. Smith credits Elon Musk’s 2018 grant as inspiration, but added safeguards that tie payouts to long-term performance and stock price appreciation.

“If we hit our goals, we all win. If we don’t, nobody wins,” Smith said. Employees defer a portion of their pay in exchange for shares that vest over time. Those earning under $90,000 receive grants upfront. It’s a model Smith believes more companies should follow—and it could appeal to Tesla, a company built on the idea of shared mission and ambition.

Next steps for Tesla

The stakes are unusually high. Musk is already threatening to divert his energy elsewhere if he doesn’t gain more control over Tesla, and investors are split. Some see him as the visionary leader still capable of transforming transportation and AI. Others question his divided attention and the risks of concentrating too much power.

For now, Tesla’s board faces a choice: offer another billion-dollar moonshot plan, treat Musk like any other CEO, or reshape the pay model entirely. What’s clear is that doing nothing is no longer an option.