Brands
Discover
Events
Newsletter
More

Follow Us

twitterfacebookinstagramyoutube
Youtstory

Brands

Resources

Stories

General

In-Depth

Announcement

Reports

News

Funding

Startup Sectors

Women in tech

Sportstech

Agritech

E-Commerce

Education

Lifestyle

Entertainment

Art & Culture

Travel & Leisure

Curtain Raiser

Wine and Food

YSTV

ADVERTISEMENT
Advertise with us

Elon Musk might become the highest paid US CEO in history – if he meets targets

Elon Musk might become the highest paid US CEO in history – if he meets targets

Friday March 23, 2018 , 4 min Read

In what might end up becoming a historic moment, shareholders of electric vehicle company Tesla approved a plan on March 21 that could give CEO Elon Musk a $2.6 billion compensation package – if he meets targets. According to the terms of the package deal, which was first revealed in January this year, Elon will receive no salary or cash bonuses, but rather rewards tied to an increase in Tesla’s market cap over the next decade. If Elon successfully raises Tesla’s market cap to $650 billion by 2028 – from today’s $53 billion – he might just make more money than any US CEO in history.

Image: Flickr

The deal has a few conditions attached to it. Under its terms, Elon must remain CEO, or at least Executive Chairman and/or Chief Product Officer, at Tesla for the entire duration of the deal. If he takes a leave of absence in this period, the plan would be suspended for that period but would kick in again on his return to work, according to a report by the Economic Times. This is likely aimed at ensuring that Elon continues to play a significant managerial role at Tesla, while managing his bouquet of other businesses, including aerospace company SpaceX, transportation company Hyperloop, open-source tech non-profit OpenAI, and technological development firm Neuralink.

The deal involves stock options as awards, divided into 12 segments or tranches. Once Tesla’s market cap hits the $100 billion mark, the first tranche will vest, giving Elon 1 percent of all Tesla stock, following by an additional 1 percent on each further increment of $50 billion. According to Reuters, if Elon successfully hits all targets of the decidedly ambitious plan over the next decade, he could end up owning as much as $55.8 billion in Tesla stock and over a quarter of the company, in addition to the nearly $130 billion-worth of stock he already owns.

However, there has been some criticism and doubt over the usefulness of the proposed pay package. Normally, votes on CEO pay usually go through with about a 95 percent vote; however, Elon’s compensation package received only a 73 percent approval vote. John Trentacoste, Partner at pay consultant firm Farient Advisors, told Reuters that the low support level showed “there is support, but scepticism” among investors. Chief among the critics have been proxy advisory firm Institutional Shareholder Services, Norway’s $1 trillion sovereign wealth fund (the world’s largest), and the California State Teachers’ Retirement System (CalSTRS), one of USA’s largest public pension plans.

Anne Sheehan, Director of Corporate Governance at CalSTRS, said in a statement, “Given the size of the award, we believe the potential dilution to shareholders is just too great. In addition, we have concerns about the lack of focus on profitability for the company, and the one profitability metric that is used excludes the cost of stock-based compensation.”

This is not the first time Elon has worked for a compensation package of this kind. In 2012, he received a similar compensation package worth $78 million in stock options if the company met production and market value targets. Elon achieved all those goals, on time. However, the challenges facing Tesla are bigger than ever before. The company is burning through a lot of money and has struggled to meet production demand for its Model 3 sedan, even as expectations build for upcoming vehicles like the Tesla Semi and the Model Y crossover. The company has also lost a lot of people in the last year alone, including President of Sales and Service Jon McNeill, accounting chief Eric Branderiz, Vice President of Finance Susan Repo, Chief Financial Officer Jason Wheeler, Vice President of Business Development Diarmuid O’Connell, and others. If Elon does meet the targets – despite these challenges and pressures – he will be setting a new record. Meanwhile, we wait and watch.