Tesla Announces Ambitious Pay Plan for CEO Elon Musk

Elon Musk has high ambitions for Tesla. “I actually see the potential for Tesla to become a trillion-dollar company within a 10-year period,” he said.
Sasha Maslov for The New York Times

For the last several years, there has been speculation about Elon Musk’s future at Tesla, and whether he would step down as chief executive in the next year or two.

Mr. Musk stoked that speculation as far back as five years ago when he said he wanted to stay through the introduction of the Model 3. Then in 2014, he said, “I’ll have to see, you know, how things are going at that point,” adding, “I will certainly be the C.E.O. for the next four or five years, and it’s T.B.D. after that.”

With the success of Mr. Musk’s various other endeavors, such as Space X, his aeronautics company, it was only natural that investors would expect that the model for Robert Downey Jr.’s Tony Stark character in “Iron Man’’ might move on to a different role at Tesla.

Well, it is now four years later, the Model 3 had its debut last July (though production delays have slowed the rollout), and Mr. Musk’s to-be-determined declaration has been determined: He told me he had agreed to stay on as chief executive at Tesla for the next decade.

The company is planning to announce on Tuesday Mr. Musk’s new compensation plan, and it is perhaps the most radical in corporate history: Mr. Musk will be paid only if he reaches a series of jaw-dropping milestones based on the company’s market value and operations. Otherwise, he will be paid nothing.

Tesla has set a dozen targets, each $50 billion more than the next, starting at $100 billion, then $150 billion, then $200 billion and so on, all the way to a market value of $650 billion. In addition, the company has set a dozen revenue and adjusted profit goals. Mr. Musk would receive 1.68 million shares, or about 1 percent of the company, only after he reaches milestones for both.

But to put these numbers in perspective, Tesla is worth only about $59 billion today.

If Mr. Musk were somehow to increase the value of Tesla to $650 billion — a figure many experts would contend is laughably impossible and would make Tesla one of the five largest companies in the United States, based on current valuations — his stock award could be worth as much as $55 billion (assuming the company does not issue any more shares over the next decade, which is unrealistic). Even reaching several of the milestones would bring him billions.

Mr. Musk’s critics — and there are many — are likely to contend that the new compensation plan is just the company’s latest publicity stunt. He has been called a modern-day P.T. Barnum who has created the illusion of success while consistently missing production estimates. The company continues to lose money; at one point last year, it was losing almost a half-million dollars an hour, according to Bloomberg News. Jim Chanos, a short-seller who has bet against Tesla’s shares — and has thus far been on the losing side of that trade — has contended that Tesla is worthless.

But Mr. Musk’s compensation plan is no illusion: He gets paid only if the company succeeds over the long term with significant gains in market cap. And it’s impossible for him to manipulate the system by trying to prop up the stock price for a temporary period. Under the terms of the arrangement, even once his shares vest, he has to hold them an additional five years before he is allowed to sell them.

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SOURCE: New York Times, Andrew Ross Sorkin

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