Elon Musk’s $1 Trillion Pay Plan & Commerce Sec. Howard Lutnick 9/5/25

0:00Bring in show music please. This is Squawk Pod. I'm CNBC producer Claire Odomodi. Today, big news from Tesla. The company has submitted a proposal for Elon Musk's compensation moving forward. A trillion dollars is on the table if he delivers on some eye-popping milestones. Chair of Tesla, Robin Dunham says motivating Musk is key. What were the right goals to be setting? What was the right balance between the motivation and shareholder value creation and what were the right milestones to be putting in place in order to actually create the right plan. 12 milestones and$7.5 trillion in shareholder value.

0:43It is about shooting for the moon, if you like. A big payout, but big results for shareholders first. This is as pay for performance, in my mind, as it comes. Then, Commerce Secretary Howard Lutnick, tariffs, a tech CEO dinner, and the vision in the White House. And that's what this whole cabinet has to do. They have to get rid of people who are against the president, against the elected leader of the United States of America, and get people on side who just want America to win. Plus, today's are the big headlines, like a fiery hearing between RFK Jr. and the Senate, and a jobs report to remember what the latest BLS data could mean for the Federal Reserve's next decision.

1:25We're now thinking about three cuts this year, 75 basis points, worse of cuts. It's Friday, September 5th. Squawk Pod begins right now. Stand Becky by in 3, 2, 1. Cue it, please. Good morning, everybody. Welcome to Squawk Box right here on CNBC. We're live from the NASDAQ market site in Times Square. I'm Becky Quick along with Andrew Ross-Sorkin. Joe is out today. Happy Friday. We made it. Holiday-shortened week. You're only here for four days. And yet, it feels like we've crammed a lot into these four days. There's been a lot going on. Yeah, there has. And there's even more today. Back to school, back to business.

2:01The S &P 500 up by 12 points after the S &P 500 set a new record yesterday. You were looking at some pretty strong gains across the board yesterday. But again, the S &P 500, I think, closing above 6 ,500 for the first time ever, looking at record levels. And that has a lot of people thinking, OK, either hooray, here we go, or oh, my gosh, what do you do when you get to these levels, depending on who you talk to and their risk assessment of things. Thanks. President Trump putting some more pressure on Fed Governor Lisa Cook to resign over potential problems with multiple mortgages. Now it appears some of the highest members of the Trump administration may be in the same boat.

2:38And we're joined right now by Eamon Javers, who joins us with that story. Good morning. Yeah. Good morning, Andrew. ProPublica taking a look at the mortgage records of key Trump administration officials given President Trump's allegations against Fed board member Lisa Cook, and the publication found that at least three of Trump's cabinet members call multiple homes their primary residences on mortgages. Labor Secretary Lori Chavez-Deremer entered into two primary residence mortgages in quick succession, including for a second home near a country club in Arizona. Transportation Secretary Sean Duffy has primary residence mortgages in New Jersey and Washington, D.C.

3:17Lee Zeldin, the Environmental Protection Agency administrator has one primary residence mortgage in Long Island and another in Washington, D.C. That's according to ProPublica, which is citing loan records. All three cabinet members denied wrongdoing to ProPublica. And in a statement, a White House spokesperson said this is just another hit piece from a left wing dark money group that constantly attempts to smear President Trump's incredible cabinet members. Unlike Fed Governor Lisa corrupt Cook, who blatantly and intentionally committed mortgage fraud. Secretary DeRimmer, Secretary Duffy and Administrator Zeldin own multiple residences and they have followed the law and they are fully compliant with all ethical obligations.

3:59And in a statement to CNBC, a Department of Transportation spokesperson said after being confirmed as the Secretary of Transportation, Sean purchased a home in Washington, D.C., where he works full time. The home in D.C. is not a rental, investment or vacation property. The same bank holds both mortgages and was fully informed of Secretary Duffy's new employment location and need for a D.C. residence. So, guys, this is one of those where you're going to start to see this surface in D.C. Now that this mortgage issue has been raised in the Lisa Cook case, you can expect that both sides will start doing oppo research on each other.

4:34And I expect this will filter out into the congressional campaigns going into next year as well. So just so I understand, and maybe you can explain the rules to us, when is it OK to have multiple mortgages listed as a primary residence and when is it not? Well, that's the question. And the question is whether it's intentional and whether it's fraudulent against the bank that gave the mortgage to the person under the assumption that that person would be living there as a primary residence. From the bank's perspective, a rental property is more risky than a primary property because, you know, renters do more damage.

5:12It might not be looked after as well if the owner's not actually living there. So banks want to know which one is your primary residence and which one is not and which one is a rental. So in each case, there's going to be nuance there. In the case of one bank holding two mortgages where they're both listed as primary, you know, the bank clearly knows this person owns two houses and what the situation is. is that fraud? Probably not. But I think if you're a politician or any kind of powerful figure in Washington today, you should just assume that somebody is going through all your mortgage records looking for any hint of inconsistency.

5:49Okay. Just looking some of this up, I looked this up last week or the week before. And just to go back over it, there are some exceptions where you can have multiple mortgages. I think primary is that the bank knows about it and the bank signs off about it, but relocation, if you're moving to a new city for a job and you're buying a new home before selling your old one, your lender may allow it. If you're buying for a dependent, particularly if it's an aging parent or a disabled adult child, you can do that. If you're co-signing for a primary residence mortgage to help a friend or family member purchase their own home while you also have a mortgage on your primary residence, or if you're an active duty service member of the military, you can have some of these.

6:31But I think the primary issue is going to be, did the bank know about it? Do the banks know about some of these issues? But it is going to get, I think you're right, Eamon, to say that this is going to be the new witch hunt, for lack of a better term. They're going to be looking at everybody. A lot of people in D.C. do have multiple homes because they live back in their district with their family, live in the district. If they don't have a rental, if they own a property there, this is going to get interesting. I think this is going to be something that is on everybody's radar screen. Yeah. I mean, I would just imagine that everybody who's campaigning next year should look at their mortgage documents and make sure they're squared away.

7:10The question here is whether someone, yeah, the question here is whether someone achieves some kind of improper benefit by lying intentionally on their mortgage forms, right? Did you get a discount on your mortgage that you didn't deserve, lower interest rate, because you said this affirmatively and it's not true, right? So that's the question. And there's a lot of, as you say, Becky, there's a lot of officials in D.C. who are coming in from home districts, administration officials who just come in for a year or two, and so they've got a new residence here and they're switching homes, all that complication.

7:44So, Eamon, can we just call a spade a spade then for a second? Because at least from the outside... No, this is Washington. No, no. At least from the outside, and maybe this is unfair to say, when you look at the Lisa Cook documentation, it raises a lot more questions, in truth to me at least, than the three examples that were just put up in the past 24 hours, which of course are now being used by Democrats to try to suggest that this is some kind of government weaponization. Which, by the way, I think we can all agree could still be a government weaponization, if you will, at the same time that she could have done something improper and possibly even illegal.

8:21And so the question is how we're supposed to look at this. And the reason I'm mentioning this is I don't want the viewer to look at these three examples and go, well, everybody's doing it when maybe they're not doing it. And when you look at her situation, I think there are at least reasonable questions to ask. And by the way, no answers have been provided thus far. And by the way, the difference, I think, in her situation is she was renting out at least one of those properties and saying that it was her primary residence. I mean, that's a huge distinction. It was that and that they were done within weeks of each other.

8:52So you had to know what your primary residence was. The banks knew that was a separate issue, but you can't, for tax purposes, let alone for mortgage issues, for tax purposes, you can't claim two homes as a primary residence either. Yeah, facially, the Cook case seems to have a lot more smoke to it than these other cases do. but that doesn't mean that oppo researchers in Washington don't have some mortgage records to look at for hundreds of people today. Yeah, I bet you're going to get a lot of it. And by the way, Eamon, you got your wish. You got to get up at 6 a.m. with us again. I know. There's no place I'd rather be, Becky.

9:27We know and we love you. We do. Amy Jabbers, thank you, sir. I love you back. Thanks for waking up. Things got heated at a Washington hearing where senators questioned Health and Human Services Secretary Robert F. Kennedy. Jellica Peebles joins us now with more on that story. Good morning. Morning, Andrew. Well, it was certainly fiery. Kennedy faced three hours of questioning, and Democrats in particular pressed him on everything from changes to vaccine policy to the recent shakeup at the CDC. Kennedy defended his overhaul of the CDC's vaccine advisory group, blaming that panel for the growing childhood immunization schedule that's contributed to the, quote, over-medicalization of American children.

10:06Colorado Senator Michael Bennett expressed concern for the lack of concrete vaccine guidance, especially as the school year gets underway. I'm asking the questions for Mr. Kennedy on behalf of parents and schools and teachers all over the United States of America who deserve so much better than your leadership. That's what this conversation is about, Mr. Chairman. Senator, they deserve the truth, and that's what we're going to give them for the first time in the history of that agency. Kennedy also claimed that the reason he fired CDC Director Susan Menares was because she admitted to being an untrustworthy person.

10:44And of course, Menares' lawyers denied that accusation, guys. You know, there are so many issues that have come up from this. And I think the blowback that you're getting right now, the White House is still defending him. President Trump is still defending him, but there is some pushback coming from some of these Republican senators. And I think that's where you get a little bit more concern. I also wonder if there's a point where President Trump gets a little tired of the headlines. And, you know, he had said himself he didn't see the hearings, but he heard he did very well. Admitted he had some ideas that are pretty different.

11:17And I just wonder if there's a point where RFK Jr.'s agenda conflicts with President Trump's agenda, especially as a president who was very proud of Operation Warp Speed and some of the innovation and advances that we saw in his first term during COVID. Yeah, it'll be interesting to see how that dynamic plays out. Like you mentioned at this point, the president does still seem to support Robert F. Kennedy Jr. in that position. And I think later this month, we could learn more as we see that big Maha Commission report that they're supposed to release. Remember, Kennedy has been talking about, you know, being able to pinpoint the cause of autism.

11:54So that could be another flashpoint that we could look forward to. Cheese will be next. Don't go anywhere. After this break, you'll hear from the chair of Tesla, Robin Denholm. Breaking news this Friday morning, the company has submitted to shareholders a new compensation package for Elon Musk designed to motivate him and retain him as CEO. A$1 trillion payout hinges on some lofty ambitions and 12 key milestones. It is a very ambitious plan. The 2018 plan was to get to billions of dollars of market cap. This plan is to get to trillions of dollars of market cap and trillions of dollars of shareholder value creation.

12:40SquawkPod will be right back.

12:45This is SquawkPod. Up in Andrew. Hugh. You're watching Squatbox right here on CNBC. I'm Andrew Ross Sorkin, along with Becky Quick on this Friday morning. Joe is off. We have some breaking news we want to get to right now. And this is a biggie. And it's coming from Tesla. The company's board calling on shareholders to approve a new long-term incentive package. This is a compensation package for Elon Musk. And it is a remarkable and the size of it all is just spectacular to even contemplate. In a proxy just filed, the company details a performance award that it says is designed to retain and motivate Musk.

13:23Much like Musk's 2018 performance award, he will only be paid if he delivers on goals, including reaching adjusted EBITDA targets and rolling out product offerings, such as the delivery of one million robo-taxis and AI bots into commercial operation. He gets nothing if he doesn't hit the numbers. It's very similar to the 2018 program in this respect. If Musk wants to receive the full award, he needs to create. Are you ready for this? Seven point five trillion dollars. That's with a T in market value for shareholders. That means that Tesla would have to reach a market cap of eight point five trillion dollars, by the way, which was twice the size of NVIDIA today, three to four times the size of Amazon today.

14:14and it's, you know, mind-boggling. We're going to walk through the numbers in just a moment because the way it's set up is he will collect effectively 1 % of the company. So this package in total could potentially be worth more than a trillion dollars if he were to get to these numbers. So I want you to look at the screen right now because you'll understand what's happening. the first tranche of any of any income he could collect would only come if the company effectively from a market cap perspective were to double in size right now it's a little over a trillion dollars tranche one is at two trillion dollars not only do you have to capture two trillion dollars you have to capture one of the metrics and this includes an EBITDA figure how many robo taxis they sell, how many robots they sell.

15:10And so he doesn't meet any of those metrics. He doesn't get it. If you don't meet the metrics, you get nothing. So this is, again, and I will almost repeat myself from when we were together in Davos, 2018. This is, to some degree, the most shareholder friendly deal you can get. He only gets paid if it actually works. He gets nothing if it doesn't work. And this is I thought this was going to be a make good for the stuff he never got. Does he ever get any of that? So as part of this, my reading of it is that he is going to be paid. What they've also asked for is an opportunity to pay him the previous package.

15:51So this is, this is on, just to be 100 % clear, this is on top of the package that was created back in 2018, that then the Delaware court struck down. They have since moved to Texas. And it's also worth noting the law in Delaware changed such that had the package been put together when after the law had changed he would have been able to get that package so what's going to happen now is that is still on appeal we'll see what happens with that but effectively they're asking for permission from shareholders to pay that so that's still on we're talking now that's a retroactive situation permission from shareholders or this or they don't think they're required no in Texas no no no in this instance, they again need to ask for permission for this package.

16:37But this is a go forward package that effectively is the next decade. So let's keep him involved. This is Elon Musk is 54 years old. If you would like him to be meaningfully engaged for the next 10 years till he's 64. Right. And by the way, there's components in here that include succession planning in what's called they gate the last two packages or tranches, even if he gets there. Unless they have a successor set up, a succession. Exactly. And the other thing that's fascinating about this package is that when you look at it, he effectively has to hold the shares after he receives them for another seven and a half years.

17:19So it's not just that he has to actually hit the numbers. The company has to, on a sustainable basis. Stay at those. stay at some of those. It's not that they have to stay at those. But he can't cash out. But he can't cash out. So if the company, you know, becomes a$7 trillion company and then goes back to being a$1 trillion company, he has not improved his lot in life. I spoke to Tesla's chair, Robin Denholm, who's been working on this. And this has been going on for months and months and months. And the goals are ambitious. And let me show you what you had to say about them. It's very important to us that we are true to our values, which is really being super ambitious and this plan actually is emblematic of that.

18:10We've got 12 tranches in the plan. The first one in terms of market cap is actually doubling the size of the company today and And we have, you know, the first in terms of the vehicle side is actually getting to 20 million vehicles that are produced and delivered. And we're only at just over eight. So to me, the plan is super ambitious. And that is what motivates Elon. So in coming up with a plan that will incent, motivate, have his time, focus and attention on Tesla, we needed to come up with a plan that was super ambitious. how much how realistic is the plan in your mind versus and you use the word um in the letter aspirational aspirational goals yes very aspirational and so yes uh is it realistic i mean you yourself and many others when we put out the 2018 plan thought that they were ridiculous numbers and so from our perspective uh it is about uh uh shooting for the moon if you like and really coming up with the ambition to the vision that we've put out in terms of the master plan for and actually shooting for that and having the whole company focused on delivering against that plan.

19:35And so just so I understand the details of this plan, there are these different milestones in terms of the market cap of the company. So, for example, you effectively have to double. You've got to get it to$2 trillion for the first milestone. But then, for example, like the EBITDA number has to 3x what it is today. Yes. So, again, we've constructed this plan so that shareholders get outsized returns. For us, it is all about shareholder value creation. And that plan reflects that. So in terms of the first tranche, as I said, it is doubling the market cap of the company. We're just over a trillion dollars today.

20:21The first milestone is at two trillion dollars. And the top milestone, if you like, the tranche 12 is at eight and a half trillion dollars. And I am saying trillion dollars. It is a very ambitious plan. plan. The 2018 plan was to get to billions of dollars of market cap. This plan is to get to trillions of dollars of market cap and trillions of dollars of shareholder value creation. How much of this is about incentivizing Elon as it relates to his ability to have more voting control of the company? That's something that he's talked a lot about for a long time. Yes, I mean, clearly, as you're constructing a plan where you want to keep the CEO motivated and focused on delivering for the company and for shareholders, you need to delve into what motivates him.

21:17And obviously, he's been very public about getting additional voting powers so that as he develops the AI products and the AI deliverables and the optimist robots and the robots to come after that, that he wants to make sure that evil can't be done with those things. And so having some sort of voting power in order to prevent bad things happening is a motivator for him. So the special committee obviously took that into account as we were working through what were the right goals to be setting, what was the right balance between the motivation and shareholder value creation, And what were the right milestones to be putting in place in order to actually create the right plan to lift the company and to create the most valuable company in history?

22:13And just so we understand the details, these shares are restricted for five years, but then they have to be held for seven and a half years. and he's only capturing the upside from where the shares trade as opposed to the way an option would work, correct? Yes, the way we termed this plan, we looked at many different options and alternatives in terms of the types of tools we would use in terms of the plan itself. And we landed on the best plan possible, which is a performance-based restricted stock award. And so how that works is that it is restricted stock, but he only gets the voting power as he hits the milestones.

23:03And then he vests in those for the first five tranches, whatever he's achieved in the five year period of time, he will vest those at the seven and a half year mark. There's a sentence which I think some people may focus on, which is the word succession that you hope over time that you can come up with a succession plan and incent Elon for a succession plan? What does that look like in your mind? So the board takes our responsibility around succession planning for the CEO, but also for other members of the executive team very, very seriously. And we have a succession plan in place or a plan for a succession if something untoward were to happen to Elon.

23:47So that is just good governance from our perspective. But also, when I speak to shareholders regularly, succession planning does come up. And so, from our perspective, putting a gate, if you like, to the last two tranches of the compensation plan, the 2025 compensation plan, was good governance. But also, telling shareholders that we are focused on it, that Elon's focused on it. Something that I discussed with Robin, you know, there are lots of CEOs. And I remember talking to Jeff Bezos last year about this. You could reference a Warren Buffett if you like to. There are a lot of CEOs who have, you know, gotten early shares in their company.

24:30They own the stake in their company. They hardly paid themselves anything. And that was it. And the incentive was that their stake in the company would continue to grow, that they didn't need to have additional incentive in this kind of way. And by the way, that's what a critic would say, would say, what does he need to be paid anything for? He has a huge stake in Tesla already, and he should be continuing to work because that unto itself should be the incentive. The challenge, and I'm going to be sympathetic to Elon in this case, is he has these sort of multiple interests, which we're seeing, right?

25:07So he's got SpaceX, and he's got Neuralink, and he's got the boring. And so how do you make sure this guy is focused squarely on Tesla? And they're trying to do it in a almost incentive way, as opposed to a, some kind of contractual way or something else. Um, there's also one other piece. I mean, it feels contractual. This is, you're not going to get paid these big payouts unless you stick around. This is as, as we said, this is as pay for performance in my mind, uh, as, as it comes, having said that, obviously a judge didn't like the way this was set up back in 2018. The law in Delaware has since changed.

25:40Texas, obviously, I think would be more favorable towards us anyway. I'm not sympathetic to the judge in Delaware. I think shareholders have spoken pretty clearly that they want Elon around. They want him paid in this manner. And I think the Delaware court has done a disservice to those shareholders. However, what you just brought up is making me think about something. And I'm kind of thinking this through as you're saying it. I mean, what if Jeff Bezos had gone off and started Amazon Web Services as a separate company and not built that into Amazon? What if, you know, you think about what if Warren Buffett had taken every major acquisition he purchased and turned it into a separate company?

26:18It's a different thing to try and keep the attention of someone who's basically like ADD, who goes off and does different things. And everything Elon does, I'm a fan of all these businesses that he's built. I think the stuff that he's done is beyond unbelievable. That's a nice segue to the other piece of breaking news this morning, which is that when if you look in the proxy, there is a shareholder proposal this morning that has been included in the proxy this year. So shareholders will actually vote on it effectively for Tesla to take an investment stake in XAI. There were a number of proposals on this topic, shareholder proposals on this topic.

26:58We are putting it on the ballot, as we would do for any proposals that come in from shareholders that meet the criteria in order to be eligible to be put on the ballot. And so we are letting shareholders vote on whether or not we should invest in XAI. and then the company will and the board will take that into account in our deliberations, whether it's positive or a negative vote on that proposal. Have you been thinking, though, about investing in XAI? And is this something that you really wanted to go to the shareholders to get their permission effectively to do first, given invariably the conflict that could be claimed?