Elon Musk‘s $1 trillion pay package is back in focus. A clause buried inside Tesla’s CEO compensation agreement suggests that a future merger with his rocket company SpaceX could remove one of the biggest hurdles to the world’s richest man’s record-setting stock award. The agreement effectively has a “delivery problem” built into it: several of the package’s operational milestones disappear if Tesla is acquired, leaving the acquisition price to determine how much of the award Musk ultimately receives.Tesla shareholders approved Musk’s $1 trillion compensation package in 2025, with the potential value now estimated at about $824 billion due to changes in the company’s share count. Under normal circumstances, Musk must meet both market-value and operational targets, including delivering Tesla’s 20-millionth vehicle, deploying one million robotaxis and selling one million humanoid robots. But the acquisition clause means those operating targets would no longer apply if Tesla were taken over, making a Tesla-SpaceX merger one possible route to unlocking more of the award, a report by The Wall Street Journal claims
Elon Musk’s Tesla pay package clause changes the performance targets
The provision appears on the fifth page of Tesla’s 2025 CEO Performance Award Agreement. It states that if Tesla is acquired or otherwise taken over, the operational milestones are automatically treated as achieved.That leaves only market-capitalisation targets to determine how many Tesla shares Musk receives. Those targets would be measured by the higher of the final acquisition price or Tesla’s market value immediately before the transaction closes.“This $1 trillion—that was supposed to be a stretch,” Mary Ellen Carter, a Boston College accounting professor who studies executive pay, told WSJ. “It turns out it isn’t really that hard. All you have to do is be bought.”According to the agreement, every increase in the acquisition value raises the number of shares available to Musk until the package reaches its maximum award.
How a Tesla-SpaceX merger could affect Elon Musk’s control
As Musk controls a large majority of SpaceX’s voting power through its dual-class share structure, he would have significant influence over any acquisition proposal.Illustrations based on current ownership show that if SpaceX acquired Tesla in an all-stock transaction valued at around $2 trillion, Tesla shareholders would receive shares in the combined company while Musk’s ownership would rise through both his existing SpaceX holdings and the additional Tesla shares awarded under the compensation package.His Class B SpaceX shares carry 10 votes each, allowing him to retain voting control of the merged company even after issuing new shares to Tesla investors.
Tesla shareholders would still need to approve the deal
Despite Musk’s influence over SpaceX, a transaction would still require approval from Tesla shareholders, where he controls just under one-fifth of the voting power.The companies are incorporated in Texas, although legal experts note that shareholder litigation would be subject to different standards at each company. SpaceX’s structure provides broader protection from shareholder lawsuits, while Tesla investors would have a clearer path to challenge a transaction if they believed it was not in their interests.“There are few clear constraints on what SpaceX could offer to acquire Tesla,” the report notes, largely because of Musk’s control over SpaceX’s voting shares and board appointments.Potential complications remain. A higher acquisition price could increase Musk’s compensation but would also dilute existing SpaceX shareholders. Alternatively, SpaceX could use its non-voting share class for part of the transaction, although that could face resistance from Tesla investors.For now, neither Tesla, SpaceX nor Musk has commented publicly on whether such a merger is under consideration. However, the compensation agreement highlights how an acquisition could reshape both Musk’s pay package and his control over a combined Tesla-SpaceX business.
