By on January 23, 2018

Elon Musk

Tesla Motors has announced that its CEO, Elon Musk, won’t be paid unless its already high stock valuation blasts into the stratosphere. The executive’s compensation is now tied to a dozen operational milestones. The first of these requires bringing the company’s current market cap to $100 billion, followed by 11 more set at $50 billion increments.

Agreeing to the program, Musk now has to stay with Tesla until 2028 as both its executive chair and product officer. While this does allow him to bring in another CEO sometime in the future, the company is likely hoping to dispel any speculation that he would abandon the position. It’s good to see Musk putting some serious skin into the game but, as a multi-billionaire, his not being paid unless Tesla’s stock valuation climbs isn’t the biggest threat to his financial security. 

He’ll also be able to fall back on minimum wage if everything falls apart, as Californian law stipulates all employees must be paid something. However, whether or not Musk decides to cash those modest checks is entirely up to him. Otherwise, his entire payment is linked to the aforementioned 10-year grant of stock options that are directly linked to Tesla’s valuation milestones. For each one met, the CEO gets another 1.69 million shares (about 1 percent of Tesla’s current total outstanding shares).

“For Elon to fully vest in the award, Tesla’s market cap must increase to $650 billion,” the automaker said.

That’s a lot of money and none of it has to do with the company’s production or profitability. Still, if Tesla didn’t bolster its current output, it’s difficult to imagine the company ever achieving those share price milestones. The company’s current valuation sits just shy of $60 billion.

Elon is already Tesla’s largest shareholder, owning 20 percent of the company, so the incentives for him to jack up its stock value are already in place. That makes this whole thing feel like publicity stunt aimed at psyching up investors, which we suppose is a sound enough strategy — especially considering this is extremely similar to how he already gets paid. Ultimately, the announcement seems like little more than a phenomenal way to make shareholders feel warm and fuzzy inside. But, no matter how you feel about Musk or his business, his commitment to the cause is genuine.

Were Tesla to achieve its proposed $650 billion valuation, it would become one of the largest corporate entities in the United States. Some financial experts are sure to scoff, however, it wasn’t all that long ago when the automaker was less than a tenth of its current size. But can Tesla continue to grow such a breakneck pace?

Musk certainly thinks so. Speaking with The New York Times, the CEO said, “I actually see the potential for Tesla to become a trillion-dollar company within a 10-year period.”

[Image: Tesla Motors]

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18 Comments on “Tesla’s New Strategy Includes ‘Not Paying’ Elon Musk and an Astronomical Share Price...”

  • avatar

    “I actually see the potential for Tesla to become a trillion-dollar company within a 10-year period.”

    As long as those pesky parked fire trucks stay out of the way.

  • avatar
    Land Ark

    Nope. I definitely do not regret selling the Tesla stock I bought at $35 for a loss a few years back when I was frustrated with its poor performance. Not one bit, no sir.

  • avatar

    Modern companies only need to foster technologies that solve problems.

    Amazon is the best problem solving collective that this world has even known. A Manhattan Project of consumerism. Their drive to get things from producers to consumers is unfailing…Tesla is doing the same thing but instead of books they move people.

    Tesla is not a car company….it is merely a shipping company…which includes us amongst its cargo.

    People who don’t see and embrace these changes face a future just as doomed and biologically stunted as trilobites, dinosaurs and the neanderthal. Companies like Tesla are changing the world….and we’d be wise to change with it.

  • avatar

    Interesting article, considering some believe this is an effort to force Musk to quit Tesla.

  • avatar

    I’m convinced that Tesla can easily hit those incentive marks. All Elon needs to do is to guide EV manufacturer Tesla to the same net profit margins as Google (23%), while at the same time reaching the same market share in automobiles as Amazon (44%) has in e-commerce. What could possibly go wrong?

  • avatar
    SCE to AUX

    “Still, if Tesla didn’t bolster its current output, it’s difficult to imagine the company ever achieving those share price milestones.”

    It’s difficult to imagine TSLA achieving those price milestones even if it *does* bolster output.

    Doesn’t he have any incentives tied to profitability? I’d rather see that.

  • avatar

    Bob Lutz should polish up his resume for that pending Tesla CEO position. LOL!

  • avatar

    Not only does Elon Musk deserve not to be paid, he should also immediately shut down production of all Tesla models until he’s fixed the fundamental charging flaw of the entire lineup, causing the charging time of a Tesla to be several times longer than the time required to fill a tank of petrol.

    Once he’s finished fixing that disastrous problem (which should have been solved long before the very first Tesla was built years ago), he should provide existing Tesla owners with a retrofitted fix as well as a hefty compensation.

  • avatar
    Master Baiter

    There’s absolutely no way the automobile business is going to provide the kind of ROI Tesla would need in order to achieve those stratospheric valuations.

    Tesla would need like 30% market share, and every Tesla buyer would have to be willing to pay 2X for a Tesla over the same car offered by other makers. Not going to happen.

    • 0 avatar

      I agree, look at it this way in just 2 months time Jaguar will launch direct rival to the model X and in about 18 months time a direct rival to the model S will appear in the shape of the new XJ. These cars will have doors that work and will have good old fashioned buttons that won’t need to be found on a touch screen. That’s just little old Jaguar. What does Elon think everyone else is doing?

      • 0 avatar

        “What does Elon think everyone else is doing?”

        —- Lagging far behind in technology and infrastructure. Even WITH those two new models coming from Jaguar, they’re still limited by the availability of fast charging, limiting them to a relatively small radius of their home.

        Until the third-party charging infrastructure develops equal-rate or faster charging capacities, all those other BEVs will lag behind Tesla’s road-trip capability.

  • avatar

    The way I see it, Musk imagines something, does the math in his head, and if he can’t see a reason that absolutely prevents something from working, he tries it. That’s pretty cool in and of itself. If he gets a handle on the whole distributed power generation thing before anybody else does, that part of Tesla’s business will be larger than the transportation side. The intermodal transportation side of Tesla is not developed, but you can see where it is going. The Hyperloop isn’t really designed to carry passengers. It is designed to carry cargo away from congested container ports to an intermodal transportation center for further distribution. Tesla’s electric semis will be very useful for transportation in intermodal corridors. Tesla’s solar roofing and powerwalls could be big after a few iterations. Tesla is rapidly gaining the know-how for large-scale solar power-generation plants. In the next few years, I can see Tesla powering past General Electric (now worth $146 b market cap), the company founded by Nikola Tesla’s rival and one-time employer, Thomas Edison.

  • avatar

    Mr. Musk, I don’t use the word ‘hero’ lightly, but you are the greatest hero in American history.

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