By Subrat Patnaik
(Reuters) - Silicon Valley billionaire Elon Musk will get no salary or cash bonuses from Tesla (NASDAQ:TSLA) Inc and all his compensation as chief executive of the electric car maker will be tied to stock and operational milestones, the company said on Tuesday.
The plan envisions the company's market value ballooning to $650 billion over the next decade - 10 times the current size of General Motors Co (NYSE:GM) - and knocks back speculation that Musk may be planning to quit Tesla any time soon.
If Tesla hits that mark and Musk achieves all his targets, vesting all stock options, his remuneration will add up to $78 billion. Also, his current 20 percent stake in the company will be worth $130 billion.
The new long-term plan, modeled after Musk's 2012 performance award but more directly linked to the company's performance, was unveiled after Tesla's much-anticipated Model 3 sedan missed a series of production targets.
The delays and Tesla's high cash burn rate has worried Wall Street that Musk's ambition to build the company into a behemoth will severely stretch its production capabilities.
Tesla's shares were up 2.5 percent in premarket trading. They gained 46 percent last year.
At $650 billion, Tesla would be the fourth-largest company in the S&P 500 index today, just ahead of Amazon.com Inc (NASDAQ:AMZN) and exceeded only by Apple Inc (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL) Inc and Microsoft Corp (NASDAQ:MSFT).
The company currently has a market value of roughly $60 billion.
Tesla said on Tuesday that the new compensation plan calls for Musk to be remunerated only if Tesla performs "extraordinarily well" and the milestones requires him to remain as CEO or serve as both executive chairman and chief product officer.
"This ensures that Elon will continue to lead Tesla's management over the long-term while also providing the flexibility to bring in another CEO who would report to Elon at some point in the future," Tesla said, adding that there was no current intention for this to happen.
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The new performance award consists of a 10-year grant of stock options that vest in 12 tranches that are tied to milestones.
The Palo Alto, California-based company's market capitalization must increase to $100 billion for the first tranche to vest and must continue to increase in additional $50 billion increments for the remaining 11 tranches, it said.
Musk, also Tesla's chairman, was an early investor in the company and is now its biggest shareholder.
A serial entrepreneur, he has founded several companies, including rocket maker SpaceX and The Boring Company. His net worth is about $20 billion, according to Forbes.
Musk has vowed that Tesla will become "the best manufacturer on Earth," helped by a new, highly automated assembly line and a simpler design for its Model 3 sedan. However, production woes have slowed deliveries.
While Tesla's luxury Model S sedans and Model X SUVs have earned it fans, analysts say the company's more mass market Model 3 sedan is the key to its success.
The company said on Tuesday it must meet a set of escalating revenue and adjusted EBITDA targets for Musk to earn compensation tied to the operational milestones.
For each tranche, Musk will vest in stock options that correspond to about 1.69 million shares, or 1 percent of Tesla's current total outstanding shares.
Tesla said Musk's new performance award was created by company's board, in consultation with third party compensation consultant Compensia Inc, and requires the approval of Tesla's shareholders.
Musk and his brother Kimbal did not participate in the more than six month process. Shareholders, excluding the Musks, will be asked to vote on it in a special shareholder scheduled in late March.