Tesla’s audacious executive compensation plan for Elon Musk has become a modern case study in corporate governance- offering powerful lessons on leadership retention, board accountability, and performance-driven reward structures.
At the heart of it lies a radical decision: Musk would receive no basic salary, no bonuses, and no guaranteed stock. Instead, since 2012 and reaffirmed in 2018, his pay would depend entirely on Tesla hitting ambitious market capitalization, revenue, and EBITDA targets- or he would walk away with nothing.
To align Musk’s incentives with long-term shareholder value, the board designed a 12-tranche structure, awarding him 1% of Tesla’s outstanding shares each time the company’s market cap increased by US $ 50 billion from a baseline of US $ 59 billion, conditional on meeting financial targets. If all conditions were met, Musk would receive 20.3 million shares, then worth about US $55 billion, by 2028.
The board further ensured continuity by tying the package to Musk’s continued presence in key executive roles- CEO, Executive Chair, or Chief Product Officer- recognizing the exceptional demand on his time from other ventures.
Boards globally are grappling with the same fundamental question: how do you retain and incentivize transformative leaders without compromising governance? Nomination and remuneration committees are now tasked not just with assembling competent, diverse boards, but with ensuring executive pay structures that drive value creation, manage risk, and signal fairness within the firm and society at large.
As the Corporate Governance Institute outlines, this involves rigorous board evaluations, proactive succession planning, and compensation frameworks that attract and motivate leaders while avoiding the principal-agent problem.
For all its ambition, Tesla’s plan has delivered results and controversy. The company’s market cap rocketed from US$ 57.4 billion in 2018 to US$ 668.9 billion by 2020, surpassing the 2028 target eight years early. It reached an all-time high of US$ 1.42 trillion in November 2024 and sits at US$ 1.04 trillion as of June 2025.
Operationally, Tesla achieved US$ 9.62 billion in EBITDA in 2021 and US$ 14.7 billion in 2024, exceeding targets. However, revenues fell slightly short- US$ 53.8 billion in 2021 and US$ 97.7 billion in 2024 against benchmarks of US$ 75 billion and US$ 150 billion, respectively.
Despite shareholder approval, twice, Musk’s remuneration drew criticism from proxy advisory giants ISS and Glass Lewis, who argued it was excessive. In 2024, Delaware Chancery Court Chancellor Kathleen McCormick ruled the package invalid, citing Musk’s outsized influence over Tesla’s board and a conflict of interest. Tesla has appealed the decision to the Delaware Supreme Court. In a strategic move, it also relocated its headquarters to Austin, Texas, signaling a readiness for legal challenges should the appeal fail.
Musk’s journey from co-founding Zip2 in 1995 to launching SpaceX, Neuralink, xAI, and acquiring Tesla and Twitter (now X Corp) for US$ 44 billion reflects a rare blend of innovation and risk-taking. It is this profile that boards globally are now navigating- the rising value of “founder-CEOs” whose vision, while hard to replace, must still be held to governance standards.
Kenya’s listed companies are watching these dynamics closely, but their executive pay structures remain more conventional. In March 2024, Safaricom’s CEO Peter Ndegwa led with KSh 252.3 million in gross pay, comprising a KSh 94.3 million salary and KSh 134.1 million cash bonus.
Banking followed, with KCB’s Paul Russo earning KES 250.2 million and NCBA’s John Gachora taking home KES 208.3 million- all including base pay, cash bonuses, deferred payouts, and non-cash benefits.
Musk’s case is a reminder that executive compensation is not just about numbers, it is a mirror of a company’s governance culture, leadership, philosophy, and future ambition. Whether the court upholds Tesla’s plan or not, it has already sparked a wider conversation: how far should companies go to secure visionary leadership, and at what cost to governance integrity?
Nicasio Karani Migwi is a banking and macroeconomics specialist, currently serving as General Manager- Special Projects and Bank Economist at Equity Group Holdings PLC.
