Tesla shareholders approve big pay package for Musk
Shareholders in Tesla, the Silicon Valley electric-car maker that has sent shock waves through the auto industry, gave their blessing Wednesday to a bulked-up compensation plan for CEO Elon Musk’s that could potentially become worth tens of billions of dollars.
The vote signals that investors remain supportive of Musk’s leadership despite the company’s recent difficulties in producing its first mass-market model, the new Model 3 electric sedan. The company also makes two luxury electric models, the Model S sedan and Model X crossover.
The company declined to reveal the vote margin, but it’s likely to be made official soon in a public filing.
Musk is already worth more than $20 billion, according to Forbes. His pay has been almost exclusively performance-based since 2012. He collected a salary of $49,920 in 2017.
Investors were expected to back the plan despite a recommendation by stockholder advisory firm Institutional Shareholder Services that it be rejected as too costly. Tesla has defended the pay package as fair because it’s contingent upon a major increase in the company’s value.
The plan would deliver vested stock to Musk in multiple increments as the company approaches $650 billion in market value and hits other financial milestones.
To reach that level, Tesla would need to increase its value about 12-fold from Wednesday’s approximately $54 billion.
At $650 billion, the company would have to have double the worth of Walmart and be worth more than Face- book, but less than Apple and Google parent Alphabet.
The plan ties Musk’s compensation entirely to the performance of the company. He won’t receive any guaranteed pay, such as a salary, bonuses or stock that vests purely over time. Instead, he’ll get awarded shares by meeting a pair of benchmarks.
One would deliver shares each time the company increases its market capitalization by $50 billion, beginning with the $100 billion mark and ending with the $650 billion level.
The other is tied to specific revenue and profit goals, beginning at $20 billion in sales and $1.5 billion in earnings before interest, taxes, depreciation and amortization (EBITDA) and topping out at $175 billion in revenue and $14 billion in EBITDA.
Musk would receive 1% of the company up to 12 times over the course of the next 10 years. The plan is contingent upon Musk remaining CEO or becoming executive chairman and chief product officer. He recently said he has no plans to step down as CEO but could envision one day becoming the head of product development if he can find a suitable replacement for the top job.