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Elon Musk won't earn salary unless Tesla hits mega milestones

The electric carmaker's CEO will not earn any compensation unless a series of hugely ambitious valuation targets are met.

Tesla Model 3

Tesla CEO Elon Musk will now only draw compensation if his company delivers on a series of ambitious milestones. The Silicon Valley-based electric carmaker announced the terms of Musk's unique compensation deal in a statement released Tuesday.

Musk's "long-term performance award" earnings will be tied directly to Tesla's market value and operations. The company has established 12 milestone targets in $50-billion-dollar increments that begin at $100 billion. These achievement milestones will trigger stock options for the enigmatic CEO. According to the statement:

"Elon will receive no guaranteed compensation of any kind -- no salary, no cash bonuses, and no equity that vests simply by the passage of time. Instead, Elon's only compensation will be a 100 percent at-risk performance award, which ensures that he will be compensated only if Tesla and all of its shareholders do extraordinarily well."

Tesla's CEO, Elon Musk, is already estimated to be worth $20 billion.

VCG/Getty Images

Given that Tesla is presently valued at $59 billion -- a number that many Wall Street analysts feel is already overblown -- Musk will likely not be compensated for the foreseeable future, even if the company performs extraordinarily well. Other criteria, including adjusted profit targets and revenue goals also apply. The press release says that Musk will receive 1.68 million shares of Tesla (roughly 1 percent of the company) after each $50 billion milestone is reached.

Interestingly, the plan's structure insulates the company from short-term spikes in valuation. Musk can't sell his shares in Tesla until five years after they've vested.

If Musk were to somehow deliver on all of the deal's targets that would eventually see Tesla grow to a $650 billion valuation a decade from now (making it one of the world's biggest companies), the agreement would make him billions. 

Musk is already estimated to be worth in excess of $20 billion.

The deal further mandates that Musk carry on as Tesla's CEO, or serve as both its executive chairman and chief product officer, a stipulation that should curb rumors that Musk might move on to focus on his other businesses, such as SpaceX, after production of the Model 3 well and truly ramps up.

Musk's compensation package deal comes at a pivotal time for the young EV-maker. The company has endured widely publicized struggles to increase production of the Model 3, a vehicle that has ignited consumer interest like few new models in the history of the automobile. 

Tesla is also burning through an extraordinary amount of money -- a recent report pegged its cash losses at nearly half a million dollars an hour. At that rate, barring future fund-raising efforts, the company will be on its way to exhausting its coffers later this year.

Musk's new salary deal is the product of Tesla's board, and it won't take effect until the company's shareholders approve.

Tesla reps did not elaborate beyond what was released in the statement when reached for comment.