Musk’s next big payday matters more than his last

Good, but not enough. Yesterday’s paycheck is a poor guarantee of good work tomorrow. Electric-car maker Tesla is asking investors to re-ratify boss Elon Musk’s court-voided 2018 pay package at an upcoming shareholder meeting. That could help retain the person on whom the company’s valuation – which has halved to roughly $500 billion over the last two years – so obviously relies. If anything, motivating Musk is more important now than it was when that old pay plan was announced.

The awards laid out in 2018 were lavish, but came with some tough targets, which Musk indeed hit. The company’s market value increased more than 10-fold, and Tesla met ambitious profitability and revenue milestones, unlocking a full payout of roughly 304 million options, worth about $40 billion today. Yet in January, a Delaware court said the process determining the package was hopelessly conflicted and that shareholders who approved it were ill-informed, voiding the grant. The company says that re-approval may remedy the situation, if courts don’t reject it.

Tesla can ill afford to lose Musk’s focus, which is already divided. His empire includes rocket-maker SpaceX and social network X. He has said he is “uncomfortable” developing artificial intelligence at Tesla without 25% voting control. Even with his 2018 award, his ownership hovers just under 21%.

And as the artificial intelligence-driven future Musk touts becomes less abstract, the effect of demotivating him would be amplified. Reuters reported earlier this month that Musk is de-emphasizing work on a cheap car to compete with rising Chinese rivals, instead going “all in” on a self-driving “robotaxi.” That would turn down the volume on the part of Tesla that actually delivers real products and profit today. Everything will depend on a high-risk AI bet. With shares down 9% since the day before the Reuters report, the market seems unconvinced.

Add in recent exits – executives Drew Baglino and Rohan Patel announced departures this week, after finance chief Zachary Kirkhorn left last year – and the company is ever-more dominated by one man. Voting to reinstate Musk’s pay to keep him is a no-brainer. But the company Tesla is becoming is not the one it was in 2018. To refocus Musk, he needs a new package, ideally with promises to prioritize Tesla’s in-house AI efforts. If he wants more voting control to do so, give it to him – provided he delivers the goods, with plenty of transparency along the way.