Elon Musk may soon get $1 trillion salary, but will it make him work better? Esther Duflo, Abhijit Banerjee weigh in
Elon Musk could become the first CEO in history to receive a trillion-dollar pay package if Tesla shareholders vote to support new policy at the electric car maker on Thursday.
Tesla argued that Elon Musk’s huge pay package, if approved, would result in the CEO putting more effort into his job. The company even said that failure to receive approval could result in the CEO stepping down.
“Without Elon, Tesla could lose significant value because our company may no longer be valued for what we aim to be: a transformative force reimagining the fundamental building blocks of mobility, energy, and labor,” Tesla Chairman Robin Denholm said in an Oct. 27 message to shareholders, days before the proxy vote.
But does more pay always mean more effort?
The general idea is that people are most motivated by money, and this basic axiom of economics guides most policy and business decisions.
But the truth may be the opposite. Economists and psychologists presented the results of monetary and other rewards in their research, according to a report by . New York Times.
Esther Duflo and Abhijit Banerjee weigh in
Nobel Prize winners and MIT professors Esther Duflo and her husband Abhijit Banerjee argue that the rewards of financial incentives are often exaggerated. NYT the report said.
According to Abhijit Banerjee, wealthy business leaders tend to think that “we are the mainstays of the economy and if we let that go, everything will collapse.”
“This kind of narrative is very attractive, especially to the wealthy – and they say it all of a sudden – but I don’t think there’s a lot of evidence for it,” he added.
Musk also stated that he may leave Tesla or take a backseat if his ownership stake is not increased enough to give him the influence over the future he desires.
What does the research say?
There is virtually no evidence that companies that keep leaders at high salaries have the best stock performance over the long term.
According to a study cited NYT In the study examining the 10 most valuable companies on the Nasdaq stock exchange between 2017 and 2022, there was no increase in the profitability of companies that paid above-average salaries to their presidents, senior managers or employees.
Another study of 429 large U.S.-based firms conducted over more than a decade found that companies that pay their CEOs less than the industry median salary tend to perform better financially.
Some psychologists mentioned NYT he also said that high-risk pressure can lead to an increased tendency for a person to drown.
Elon Musk’s trillion dollar destiny
Shareholders gathering for Tesla’s annual meeting in Austin, Texas, on Thursday will decide by proxy vote whether to give Elon Musk enough shares to potentially make him history’s first trillionaire.
The package could increase Musk’s holdings of Tesla shares from the current 12% to more than 25%.
The result of the vote will be announced Thursday at Tesla’s annual shareholder meeting at its factory in Austin, Texas.
To buy Tesla shares, Musk must get the approval of a majority of the company’s voting shareholders. Increasing the chances, Musk will be able to vote for his own shares worth 15% of the company.
