To nab the jaw-dropping pay package that could make Elon Musk the first trillionaire, the Tesla CEO first has to find his successor — eventually, anyway.
Succession planning is rarely easy and often gets harder when it involves replacing a high-profile exec. Whoever eventually steps in to replace Musk will have a big job to do, leadership experts told Business Insider.
While Tesla’s regulatory filing said that its Nominating and Corporate Governance Committee periodically reviews CEO succession planning, this is the first time Tesla’s Board has included this requirement in Musk’s pay package.
“As a matter of best practice, and to ensure the resiliency of Tesla, the Board regularly considers succession planning for both sudden, unanticipated events, in addition to longer-term planned succession for its executives,” the SEC filing said.
Musk’s unprecedented pay package is even more ambitious than his last. This latest package includes a new set of a dozen milestones to be completed over a 10-year period, such as boosting the company’s valuation to $8.5 trillion, selling 12 million cars, and getting a million robotaxis on the road.
While the succession planning requirement follows a rocky period of Musk’s leadership, it doesn’t quite signal that Tesla’s planning to cut ties with its CEO — in fact, it might indicate the opposite.
Tesla gears up for another decade with Musk
Musk said earlier this year that, unless he dies, he will remain Tesla’s CEO in five years. While questions have swirled about another leader taking Musk’s place at Tesla, this pay package suggests that Musk and Tesla have no plans to break up in the near-term.
Neither Tesla nor Musk responded to a request for comment from Business Insider.
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The SEC filing states that Musk must develop “a CEO Succession Framework” for the 11th and 12th tranches to become earned shares.
Alexandra Merz, a staunch Tesla investor who goes under the X username @TeslaBoomerMama, told Business Insider that the succession planning component actually shows that the company intends to stick with Musk long-term.
“It’s not as if it’s imminent,” Merz said about the succession planning requirement. “If not, it would have been with the first milestones. It’s only with the last two. We’re far from that.”
Succession planning is normal
Kiana Danial, a Tesla shareholder and investing author, said that every standard corporation has succession planning in place, and the board has finally caught up to this norm.
Tim Quigley, a professor of management at Terry College of Business at the University of Georgia, told Business Insider that while he thinks succession planning is a good idea, Musk could ignore it completely if he doesn’t earn the last two tranches.
The board “should be ensuring Musk is incentivized today to have a short list of names that could take over,” Quigley said.
While Board Chair Robyn Denholm said in a CNBC interview on Friday that Tesla has an emergency succession plan in place, Quigley said the board also must consider normal succession scenarios, which occur when a CEO passes the baton to a new leader on a date agreed on by everyone involved.
An eventual transition could be a challenge
Many companies have had successful CEO successions, such as the transition from Steve Jobs to Tim Cook or Jeff Bezos to Andy Jassy. But anyone familiar with the TV series “Succession” knows that picking a replacement is often no easy feat.
The potential challenge of succeeding Musk at a company played out in July when Linda Yaccarino stepped down as CEO of X. During her two-year tenure at the social network, she had to try to balance a goal of rebuilding the company’s ad business under the shadow of Musk, the platform’s highest-profile user. By contrast, observers say, SpaceX COO Gwynne Shotwell appears to have had greater success running the company while steering clear of controversies involving Musk.
As a leader who has been defined by his controlling style and self-assigned mission to save humanity, Musk might struggle to step aside.
“Whomever would want to come and fill his shoes,” Quigley said, “would have a lot of questions about how much autonomy they would have when they did so.”
Quigley said that when a predecessor stays involved in a company, their successor can feel hamstrung. In Tesla’s case, he said, the company could suffer if Musk believes that what previously made it successful will continue working, or if he became too rigid with age.
Another aspect that might make Musk’s transition challenging is his association with the brand — for better and worse. Many of his followers equate the company’s success with his leadership and vision.
Jeffrey Sonnenfeld, senior associate dean for leadership studies at Yale School of Management, said Musk’s controversies have hurt the brand. He also faulted the board for what he sees as an undue adulation of Musk and his abilities.
The board is “caught up in a cult of idolatry,” Sonnenfeld told Business Insider, referring to what he sees as the directors’ approach toward Musk.
Musk’s tenure at the White House demonstrated just how deeply he’s connected to Tesla. In response to his efforts with the Department of Government Efficiency, Tesla faced months of organized boycott efforts that resulted in violence and vandalism aimed at the company and its customers.
