• Taking a page from the private equity playbook, Intel is requiring its new CEO to put some skin in the game. Lip-Bu Tan has agreed to buy $25 million worth of Intel stock with his own money. And here’s the rub: he won’t get paid if he cashes in. However, if he smashes the lights out with his performance, his pay package has a potential value—which assumes hitting every possible goal at the highest level—of more than $400 million, according to an analysis conducted by Farient Advisors. And for shareholders, that would mean Intel’s market cap grew by $208 billion to a whopping $312 billion.

Intel CEO Lip-Bu Tan had his first day on the job on Monday, and the challenge the chip industry veteran faces is staggering.

The stock, priced around $26, has lost more than half its value since December 2023—although it rallied more than 10% after his appointment—and the company is at a strategic crossroads with its chip design and manufacturing businesses. Tan’s own letter to Intel employees noted it had been a “tough few years” and that the company was at “one of the most pivotal moments in its history.”

But if Tan, 65, can hammer home the strategy and execute what could be a colossal turnaround, the Malaysian-born, Singapore-raised executive could realize a significant pay package based on the terms of the deal he struck with the Intel board, dated March 10. And as for Intel’s shareholders, Tan’s achievement would mean the market cap swelled to more than $300 billion—a level the tech giant hasn’t seen in two decades.

Farient Advisors CEO Robin Ferracone told Fortune that Tan’s remit isn’t limited to executing a turnaround; he very nearly needs to rebuild the company. “Doubling the stock price gets you to where you were a few years ago, but tripling it to the $70 range—Intel hasn’t seen that since about 2000,” said Ferracone. “So, it’s a big lift.”

Tan’s offer letter outlines a complex series of incredibly sky-high hurdles he’ll have to clear flawlessly for shareholders and the company. But he could ultimately wind up with a pay package valued above $400 million if he maxes out all his performance and his potential awards, according to Farient’s analysis of his pay plan. In addition, Tan will have to personally invest $25 million of his own money in the stock during his first 30 days on the job, and hold it for the next five years, meaning he could potentially lose money if he isn’t up to scratch.

“It’s a high-stakes package that reflects both the board’s confidence in his ability to drive a turnaround and a strong commitment to pay-for-performance principles,” corporate strategy consultant Arjan Singh told Fortune.

Tying stock price growth to performance targets sets a high bar, said Singh, managing partner of Corporate War Games and an adjunct professor of marketing and global strategy at Southern Methodist University’s Cox School of Business.

“This signals that the board is aligning executive incentives directly with shareholder returns,” he said. “It also helps mitigate concerns about excessive CEO pay without results—there’s no free equity here, and failure to deliver won’t be rewarded.”

Eric Hoffmann, vice president and chief data officer at Farient Advisors, told Fortune he “can’t stress enough that (Tan’s) grants could fail to vest entirely without stock price appreciation and slightly better than median total shareholder return against the S&P 500.”

Anatomy of a turnaround comp plan

According to Farient’s analysis, Tan’s annual cash pay consists of a base salary of $1 million with a target bonus of $2 million. His annual 2026 go-forward equity grant is valued at $24 million, but he won’t get it until next year.

For the sign-on portion of his deal, Intel gave Tan a new-hire performance stock unit (PSU) grant valued at $17 million and a stock option grant valued at $25 million. But Tan will have to double the stock price to earn the target number of PSUs—plus the stock price must outperform the S&P 500. If Tan succeeds in tripling the stock price, he’ll earn three times the number of shares. In that scenario, the PSU grant would be valued at $153 million, according to Farient’s analysis. The options vest in five tranches over five years. In the tripled-stock-price scenario, the first two tranches of his stock options could be exercised for $39 million and the other three tranches could be exercised for $88 million for a total of $127 million, according to Farient.

For his annual awards, Intel gave Tan a second PSU grant valued at $14.4 million that could be worth $86 million if the stock price triples and Intel hits the shareholder return and stock-price goals for maximum share payout. He also got another grant of stock options valued at $9.6 million which could be exercised at a value of $42 million.

Combining both the sign-on and fiscal 2025 awards, assuming maximum performance and a tripling of the stock price, Tan’s offer has a potential value of some $408 million, according to Farient.

Hoffmann described the compensation scheme as “highly leveraged.” There’s a significant downside for Tan, because he could lose out on his grants, and he could also lose money on his investment, he said.

But if Tan achieves the maximum possible performance, Intel shareholders “will be dancing in the streets,” Ferracone told Fortune, given that Tan’s long-term incentives are “highly aligned with shareholder interests with a recognition that Intel needs to create significant value and catch up if not leapfrog competitors in the AI space.”

The grant date value of his total pay package is $69 million, which includes his salary, target bonus, and value of the options, equity and PSUs, but does not account for realizing the maximum amounts, which could be higher if the stock price rises.

Based on the terms of the offer, that’s exactly what Intel is expecting of Tan—plus much more. The lion’s share of Tan’s potential pay is at risk and equity-based and one of the main components is the new-hire performance stock grant.

“CEO equity awards are often tied to achieving specific operational or financial metrics, but it’s infrequent to require such steep stock price increases,” corporate governance expert and Georgetown University associate professor Jason Schloetzer told Fortune. “In my view, the plan distinguishes itself for its rather aggressive performance criteria.”

Schloetzer noted that CEO compensation plans often have three-year vesting schedules, and Intel’s five-year plan is longer than usual. He said it could reflect the Intel board’s desire “to balance the aggressive target with not motivating excessive risk taking or cutting corners that create long-term harm.”

In a statement, Intel said Tan’s pay package is competitive with the market.

“Lip-Bu’s compensation reflects his experience and credentials as an accomplished technology leader with deep industry experience and is market competitive,” Intel said. “The vast majority of his compensation is equity-based and tied to long-term shareholder value creation.”

Intel’s comp plan design is a clear signal to investors that the company believes in Tan’s ability to reverse the tech giant’s performance, but that he won’t get a free lunch, said Singh. Plus, Tan will be on equal footing with investors at the outset with his vow to buy stock worth $25 million—and then hold onto it for the full five-year period for all his PSUs to vest.

“Obviously, the use of equity-based vehicles, the longer-term vesting of five years, the performance parameters in the plans, and Lip-Bu’s required investment clearly communicates that Lip-Bu’s Job #1 is to create shareholder value, which is totally aligned with shareholders’ interests,” said Ferracone.

As for his personal investment, it’s not a common feature in CEO offer letters, said Courtney Yu, director of research at compensation and governance firm Equilar, and the size of the investment itself is on the higher side relative to CEOs with a similar ask.

Private equity firm CEOs often hold large stakes in the companies they lead, but public company CEOs are typically required to build up an ownership stake over time by holding the equity they get as compensation and maintaining a minimum stake valued at five or six times their annual pay.

“For a public company, this level of financial commitment is a strong signal of personal accountability,” noted Singh. “It ensures the CEO has real skin in the game, which could resonate well with shareholders looking for leadership that is fully committed to Intel’s long-term success.”

Regarding Tan’s $25 million stock purchase, Intel said it “reflects his belief in Intel and commitment to creating shareholder value.”

In addition to the agreement with Tan, Intel announced that it would compensate interim co-CEOs Michelle Johnston Holthaus and David Zinsner with $1.5 million in cash apiece for holding down the fort during the search process after the end of former CEO Pat Gelsinger’s tenure at the chip giant in December.

Similarly, the board’s interim executive chair, Frank Yeary, will return to being Intel’s independent chair. For his time in the interim role, Yeary will get restricted stock units valued at $700,000, the company said.