Elon Musk's pay package is a clear signal that Tesla is done being just a car company

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The richest person in the world now has a clear path to become the first $1 trillion man.

Elon Musk will have to hit key milestones, perhaps even improbable ones, to unlock record-breaking compensation. Still, why is the pay deal designed to incentivize a chief executive so big? The simple answer is that not all CEOs are equipped with Musk's vision, the commensurate cult of personality, Wall Street "juice," and bully pulpit.

It's also a vote to go all in on whatever that vision is. (They might as well — they're paying for it!) And that vision is clearly pulling the e-brake, drifting away once and for all from the idea that it's a car company and shooting for the moon. Transforming and electrifying the auto industry was simply not enough.

For Tesla (TSLA) investors who voted resoundingly to pay the man, he is worth so much because the stock could be worth that much if that vision is realized and what exists inside Musk's head makes it out into the real world. Which is why one thing detractors and boosters seem to agree on is that Musk IS the stock. We've seen Amazon (AMZN) without (CEO) Jeff Bezos, Apple (AAPL) without Steve Jobs, and Microsoft (MSFT) without Bill Gates, but for the time being, we're not going to see Tesla without Musk. Sign up for the Yahoo Finance Morning Brief By subscribing, you are agreeing to Yahoo's Terms and Privacy Policy

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The sheer size of the compensation package has drawn so much attention. But from the perspective of Tesla's board of directors, who sold the pay deal as motivation to hold on to a singular talent, granting Musk so much stock is very simple. This is a reward for completing a specific job and enriching shareholders and removing the point-man risk of a Musk-less Tesla.

Obviously, the figures are much bigger now. No one is disputing that. But Musk's pay package would grow in tandem with the company's market value. So it makes sense (at least to those who voted in favor) that Musk's comp would rise alongside Tesla's stock price. And given the ambitious goals that Musk must clear to earn greater stock rewards, the pay package seems on par with his previous compensation, or even more restrictive because of how far-fetched the targets are.

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The case against such an incentive structure also has its merits, of course. As flagging sales tied in part to Musk's politics have shown, Tesla is exposed to substantial risk by leaning so heavily into the reputation of one man. Tesla, the detractors say, is taking on more risk and potentially diluting the influence of other stakeholders to satisfy Musk's desires.

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Musk has said that while the package is understood as monetary compensation, what he is really after is influence — that is, the voting power to steer Tesla as it evolves from a car company into a robotics leader. He's not comfortable building a "robot army," he pleaded with shareholders, if his critics can eventually oust him from the company.

For now, the pay approval stands as a resounding vote of confidence. It gives Musk the green light to go full-bore on elevating Tesla into an AI and robotics company. After remaking the auto industry, his backers believe Musk will be the face of the tech world's first meaningful pushes to mass-produce the physical applications of AI's intellectual power.StockStory aims to help individual investors beat the market.

Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on X @hshaban.

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