SAN FRANCISCO, United States (AFP) — Tesla chief Elon Musk will only get paid if the company’s stock soars — but could cash-in to the tune of more than $50 billion if it does, according to a plan approved by shareholders Wednesday.
A Tesla spokesperson confirmed that shareholders voted to approve the proposal for a 10-year performance stock award “entirely contingent on achieving market cap and operational milestones that would make Tesla one of the most valuable companies in the world.”
If goals are hit, the compensation in shares could top $50 billion.
For Musk to get the maximum, Tesla’s stock market value would have to grow to $650 billion, an increase of some $600 billion from current levels, and certain revenue and profitability goals would also have to be achieved.
The new package, using shares which “vest” based on certain criteria, is modeled on a similar deal created in 2012, after which Tesla’s market value increased by more than 17-fold.
Tesla stressed that Musk will “receive no guaranteed compensation of any kind — no salary, no cash bonuses, and no equity that vests simply by the passage of time.”
Instead, according to the California-based company, Musk will only be compensated for his job if shareholders “do extraordinarily well.”
A pair of large institutional investors reportedly opposed the pay plan due to its size and questions as to whether it would actually motivate Musk.
California state teachers’ pension fund CalSTRS told AFP that it voted all of its 258,084 shares of Tesla against the Musk compensation package.
“Given the size of the award, we believe the potential dilution to shareholders is just too great,” CalSTRS director of corporate governance Anne Sheehan said in response to an AFP inquiry.
“In addition, we have concerns about the lack of focus on profitability for the company.”
The package for Musk, 46, features a 10-year grant of stock options which vest in 12 tranches.
To meet the first milestone, Tesla’s current market cap must increase to $100 billion. Eleven additional milestones are set at increments of $50 billion.
For each goal hit, Musk will get stock awards of one percent of Tesla’s current total outstanding shares. If none of the tranches are achieved, he won’t get anything.
The package is contingent on Musk remaining as Tesla’s CEO or as executive chairman and chief product officer.
“This ensures that Elon will continue to lead Tesla’s management over the long-term while also providing the flexibility to bring in another CEO who would report to Elon at some point in the future,” the company said in an earlier statement about the compensation proposal.
Tesla shares finished the formal trading day up 1.9 percent to $316.53, giving the automaker a market capitalization of some $53.5 billion.
Musk’s net worth was recently estimated by Forbes magazine at some $21 billion, making him one of the 100 wealthiest people on the planet. He also runs the private space firm SpaceX.
© Agence France-Presse
