Silicon Valley billionaire Elon Musk will get no salary or cash bonuses from Tesla, and all his compensation as CEO will be tied to stock and operational milestones, the electric car company said on Tuesday.
Tesla also put to rest speculation that Musk will quit any time soon, saying the milestones required 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.
Musk's new long-term remuneration plan, modeled after his 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.
Musk's only compensation will be a 100 percent at-risk performance award, which ensures that he will be compensated only if Tesla performs "extraordinarily well," the company said in a statement.
The new performance award consists of a 10-year grant of stock options that vest in 12 tranches that are tied to milestones.
"For Elon to fully vest in the award, Tesla's market cap must increase to $650 billion," Tesla said.
The company currently has a market value of roughly $60 billion.
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 with a 20 percent stake.
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.
Tesla's shares were up 1 percent in premarket trading. They gained 46 percent last year.
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 creating the compensation plan, which took more than six months. Shareholders, excluding the Musks, will be asked to vote on it in a special shareholder scheduled in late March.
Reporting by Subrat Patnaik and Shubham Kalia