Elon Musk will get nothing if Tesla fails, almost everything if it succeedsOn January 24, 2018 by Kenna
Billionaire Elon Musk‘s future compensation from Tesla is now completely dependent upon the electric car company’s future success.
Under a new 10-year plan announced on Tuesday, the Tesla CEO will henceforth receive $0 in salary. Instead, Musk will be rewarded with Tesla stock — but only if 12 specific “operational milestones” are met.
“Elon will receive no guaranteed compensation of any kind – no salary, no cash bonuses, and no equity that vests simply by the passage of time,” Tesla’s statement reads.
This means that unless Tesla attains specific levels of success — like hitting $200 billion in value — Elon will not gain rights to company stock (which would be his form of “salary”).
Accordingly, Tesla says this “ensures that he will be compensated only if Tesla and all of its shareholders do extraordinarily well.”
The new package also means that Musk could also leave the company if he so desires — possible paving the way for him to focus on SpaceX.
Under the performance-based contract, each time Tesla his a milestone Musk will get the rights to nearly 1.7 million shares of Tesla stock. Over 12 possible installments (if everything goes exceedingly well), this could add significantly to Musk’s already substantial wealth. Musk already owns more than 25 percent of Tesla, and has voting control over the company.
It’s little secret that Tesla — which currently tops the U.S. in electric car sales — has incredible growth ambitions behind a visionary CEO with equally dramatic ambitions, both here on Earth and beyond.
The first of 12 targets is Tesla hitting a value of $100 billion. It’s currently valued at some $60 billion. If all 12 milestones are eventually reached, the company will be worth a whopping $650 billion dollars. This would make Tesla (as of now) the fourth most highly- valued company in the world, behind tech juggernauts Microsoft, Apple, and Alphabet (the parent company of Google).
In order for Tesla to achieve any sort of financial gains — and stop posting massive losses — it’s widely agreed that the company must have substantial success with its first mass-market vehicle, the Model 3. The Model 3 is a smaller sedan intended to be offered at around $35,000 for the majority of potential customers who aren’t interested in (or simply can’t afford) Tesla’s high-end luxury models, notably the Model S.
The Model 3, however, has so far experienced major production woes, stemming back to fall 2017. There is still significant demand for the Model 3, as some 400,000 people are on the waiting list. Tesla is now reportedly producing 1,000 Model 3s a week, according to the electric car blog Electrek, but will to need to dramatically ramp up production to meet its lofty goals.
Musk’s compensation plan, which Tesla claims Musk recused himself from, was developed by its board of directors and the private compensation consulting firm Compensia, Inc. It could very well be a move to appease Tesla’s impatient or concerned investors and underscore Musk’s commitment to not just make the company profitable — but make it immensely successful.
And it’s not as if Musk needs a salary. He’s worth around $20 billion, and owns a cluster of five mansions in Bel-Air.