Elon Musk’s Effective Pay Jumped 3.6 Million Percent in 2016, Report Says

The Tesla CEO's compensation skyrocketed last year, thanks to stock options.

Despite drawing virtually no salary, Elon Musk became the highest-compensated CEO at a U.S. automaker last year, according to a new report. 

The Tesla CEO is officially paid California’s minimum wage, and typically refuses even that pittance. But in 2016, he exercised $1.34 billion stock options that were set to expire at the end of the year, according to Automotive News. That effectively increased Musk’s pay by 3.6 million percent, dwarfing the amount CEOs at other automakers took in.

However, Musk’s total compensation “was not actually received in cash upon these exercises,” a Tesla proxy statement said. Musk sold $593 million in stock, which was used “solely in order to pay…income taxes related to such exercise,” the proxy statement said.

The $1.34 billion figure was based on Musk exercising options on 6.7 million Tesla shares, at an average value of $194 per share. He was able to access those shares due to meeting certain performance milestones set by the Tesla board in 2012.

That arrangement offers Musk 10 performance milestones and 10 market-capitalization goals rewarded by stock options. For each increase in stock options, Musk must meet both one performance and one market-capitalization goal. So far, Musk has met six performance and eight market-capitalization goals, according to Automotive News.

The performance milestones Musk met included: Completing the Model X alpha and beta prototypes; getting the Model X into production; completing the Model 3 alpha and beta prototypes; and achieving cumulative production of 100,000 vehicles.

After Musk, the second-highest compensated CEO in the U.S. auto industry last year was Thomas Lynch of supplier TE Connectivity, who earned $32.1 million. Ford CEO Mark Fields, who was since been ousted, made $16 million, while General Motors CEO Mary Barra made $11.9 million in total compensation.