Elon Musk’s pay package is a clear signal that Tesla is done being just a car company
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The world’s richest person now has a clear path to becoming the first man worth $1 trillion.
Elon Musk will need to reach significant milestones, perhaps even impossible ones, to unlock record-breaking compensation. Still, why is the pay deal to incentivize a CEO so big? The simple answer is that not all CEOs are equipped with Musk’s vision, the corresponding cult of personality, the “juice” and bully pulpit of Wall Street.
It is also a vote to put everything into perspective, whatever that vision is. (They might as well—they’re paying for it!) And that vision is clearly to pull the e-brake, move away from the idea of this being a car company altogether, and shoot for the moon. It certainly wasn’t enough to transform and excite the auto industry.
He’s so valuable to Tesla (TSLA) investors, who vocally voted to pay the guy, because if this vision comes true and what’s in Musk’s mind spills over into the real world, the stock could be worth that much. So one thing that detractors and supporters agree on is that Musk is stock. We’ve seen Amazon (AMZN) without (CEO) Jeff Bezos, Apple (AAPL) without Steve Jobs, and Microsoft (MSFT) without Bill Gates, but for now we won’t see Tesla without Musk.
The size of the compensation package attracted much attention. But from the perspective of Tesla’s board, which is selling the salary deal as motivation to acquire a singular talent, giving Musk so much stock is a no-brainer. This is a reward for completing a specific job, enriching shareholders and eliminating the point-man risk of Musk-less Tesla.
Frankly, the numbers are much larger now. Nobody objects to this. However, Musk’s salary package would grow in line with the company’s market value. So it makes sense that Musk’s shares would rise along with Tesla’s share price (at least for those who voted in favor). And given the ambitious goals Musk must complete to earn larger stock rewards, the pay package seems on par with his previous salary, if not even more restrictive because of how far-fetched the goals are.
Of course, there are benefits to being against such an incentive structure. Declining sales, due in part to Musk’s policies, showed that Tesla was exposed to significant risk by leaning so heavily on the reputation of one man. Detractors say Tesla is taking on more risks and potentially weakening the influence of other stakeholders to satisfy Musk’s desires.
