Elon Musk Will Forego Salary if Tesla Doesn’t Meet Expectations
Tesla’s CEO is betting the next decade’s pay on the company’s financial performance.
One could argue that the Elon Musk is to Tesla as Steve Jobs was to Apple. The Stanford dropout found riches after he went on to become the co-founder of PayPal and ultimately became a self-made billionaire. Now, the man who was good at making lots of money during his younger years is risking his pay over the next decade by betting on his company's stock.
The CEO's new compensation package announced Tuesday is something that takes an all-or-nothing approach to the betting table. Tesla will pay out stock options to Musk over the next decade in 12 different iterations, but only if he meets several sets of goals. According to Wired, In order for the stock options to be paid out, a set of milestones will need to be reached, one being for Tesla's overall market value, and the other related to the company's overall profitability.
Each time the company's value increases $50 billion, Musk will receive a slice of the metaphorical money pie. Should he manage to raise the company's value to a staggering $650 billion, Musk will be paid out all 12 cuts of stock, totaling an astonishing $55 billion.
To put this into perspective, Musk would need to raise Tesla's valuation to above that of Alibaba, Wells Fargo, JPMorgan, Facebook, Amazon, Microsoft, and Google (Alphabet). The only company in the United States currently worth more than the company's target value is Apple. Tesla currently sits around a similar valuation as General Motors, despite annual vehicle production being only 3 percent of GM's. Perhaps sending the company's SEC filing to Mars with SpaceX's Falcon Heavy will provide enough momentum for the financial targets to be hit.
The New York Times went on to call this payment plan the "boldest" that it has ever seen in corporate history. And although Musk will be making California minimum wage throughout this time, as required by law, that's certainly a drop in the hat compared to the potential billions of dollars that would be made in stock options. If the $650 billion market target is not met, yet Musk still raises the company valuation only 80 to 90 percent, his compensation would be a goose egg.
Musk himself previously admitted that stocks were potentially overvalued after the market took to a bull run in 2017. Business Insider agrees with the at-risk performance stipend, calling the plan "delusional," especially since the company is burning through a half-million dollars every single hour.
But with big risk comes great reward, and if the top of the Fortune 100 list tells us anything, it's that financial institutions and technology companies are reigning supreme. Tesla was able to make a name for itself by showing up early to work, and producing things that many have thought to be impossible or impractical. Should the company meet the goals it seeks, Musk's going to need a bigger wallet.