Elon Musk won’t get paid by Tesla if targets not met

Elon Musk won’t get paid by Tesla if targets not met

In perhaps one of the boldest moves in corporate history, Elon Musk, founder and CEO of Tesla Motors, has announced his new compensation plan: Musk will only be paid if he reaches a series of milestones based on the company’s market value and operations. If the goals are not met, the multi-billionaire will be paid absolutely nothing.

According to the New York Times, Tesla has set a dozen market capitalisation targets, each US$50 billion (RM196 billion) more than the next. The first target starts at US$100 billion (RM391.75 billion), then US$150 billion (RM587.63 billion) and so on, with the final goal being US$650 billion (RM2.54 trillion) at the end of the 10-year plan.

The only other companies with a market cap above US$650 billion today are Apple with US$908 billion (RM3.55 trillion), Alphabet (Google’s parent company) with US$807 billion (RM3.16 trillion) and Microsoft at US$707 billion (RM2.77 trillion). To put those numbers in perspective, Tesla Motors’ market cap is worth only about US$59 billion (RM231 billion) today.

Elon Musk won’t get paid by Tesla if targets not met

The Model 3 is Tesla’s first ever mass volume electric car

As for Musk, he will be paid out in 12 tranches – again, only if the targets are met. The first payout (1% of the company’s shares, worth about US$600 million [RM2.35 billion] in today’s share price) will only be issued if Tesla’s market value hits US$100 billion. Under the plan, Musk’s pay is tied strictly to stock performance and profit. He will receive no salary or bonus. There are also milestones tied to revenue and adjusted earnings before interest, taxes, depreciation and amortisation, Tesla said in a statement.

Musk will collect an additional 1% stock grants for every additional US$50 billion increase in market value. To hit the final target, Tesla will also have to hit sales and profits targets, including an annual revenue of US$175 billion (RM685 billion), which is more than General Motors’ sales.

The publication also said experts find it “laughably impossible” for Tesla to be valued at US$650 billion (that would make Tesla one of the five largest companies in the US, based on current valuations). However, if Musk somehow succeeds, his payout could be worth a staggering US$55 billion (RM215 billion), and his stake in the company would be worth US$184 billion (RM720 billion), making him the world’s richest man.

Elon Musk won’t get paid by Tesla if targets not met

Musk, who is already the world’s 44th richest person with a US$21.5 billion (RM84.23 billion) fortune (according to Bloomberg’s billionaires index), is Tesla’s biggest shareholder with a 21.9% stake. If he keeps all his current shares and achieves the maximum bonus target, he could end the decade with 28.3% of Tesla’s shares (if the company does not release any more).

However, the announcement was met with a number of criticisms, with some calling it a publicity stunt and to create the illusion of success while consistently missing production estimates. Tesla continues to lose money – at one point last year, it was losing almost a half a million dollars (RM1.96 million) an hour, according to Bloomberg.

The New York Times however, said Musk’s compensation plan is no illusion. The CEO only gets paid only if the company succeeds over the long term, 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.

Tesla’s shareholders will vote on the proposals in March. Musk and his brother Kimbal, who is Tesla’s third-biggest shareholder, will recuse themselves from the vote.

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Matthew H Tong

An ardent believer that fun cars need not be fast and fast cars may not always be fun. Matt advocates the purity and simplicity of manually swapping cogs while coping in silence of its impending doom. Matt's not hot. Never hot.

 

Comments

  • Since when does the company owner draws own salary? Normally most of them declared that they get zero salary, but they never mention they earn profits from company stock options & dividends. If even the owner draws salary from a company he owns, then he winliaolor!

    Like or Dislike: Thumb up 26 Thumb down 13
    • Richard Lam on Jan 24, 2018 at 2:49 pm

      This is how the proper way a CEO behaves. Unlike our Proton management and directors. Company lose money also, seek bailout in the billions also, not even one director offered a salary cut.

      Infact they get their full bomus and increments. Typical Malaysian style

      Like or Dislike: Thumb up 24 Thumb down 19
      • Err. Becoz P1 management and directors dun own the company like Elon does?
        So who works for free? Not even u here.

        Like or Dislike: Thumb up 27 Thumb down 13
      • Company perks, Audi A8 limo car

        Like or Dislike: Thumb up 7 Thumb down 0
    • tokmoh. on Jan 24, 2018 at 2:49 pm

      I dunno about American tax law, but I know in Malaysia, dividend income is tax exempt.

      Even so, I see business owner usually declare director fee income instead, which is taxable. Why?

      Like or Dislike: Thumb up 9 Thumb down 2
      • Probably compliance to Bursa requirements when the company is listed. In exchange, all allowances, cars, expenses r charged into company accounts. So even thou its taxable, the owners still untung much more.

        Like or Dislike: Thumb up 8 Thumb down 8
      • heybadigol (Member) on Jan 24, 2018 at 4:09 pm

        Dividend income (from Malaysian source) here is taxable at corporate (company) rate. So you receive dividend after deduction of the tax. When you do assessment of tax later, you can set off the tax for the dividend against your total taxable amount from all your income sources (salary, rental, dividend, etc). Or this was what i remembered from uni a few decades ago lah.

        Like or Dislike: Thumb up 10 Thumb down 0
  • heybadigol (Member) on Jan 24, 2018 at 12:35 pm

    As a stockholder of Tesla, won’t he also get dividends just like other stockholders? So he will get paid from there as well? Or does Tesla not give dividends? Since they are not making profit.

    Like or Dislike: Thumb up 11 Thumb down 0
  • Aslano on Jan 24, 2018 at 12:39 pm

    At least Tesla never ask Trump for soft loans or quick bailout from Dongfeng China.

    Like or Dislike: Thumb up 6 Thumb down 11
    • Ekceli they did. Deswai u dun see any China EV cars in USA. Surely this cant happen in such a ‘open’ country like US, right? Something must be going on.

      Like or Dislike: Thumb up 12 Thumb down 10
    • tokmoh. on Jan 24, 2018 at 3:54 pm

      Lel. You’ll be surprised how much subsidies handed to him.

      If you read enough, you’ll find Americans question how deserving he really is in receiving govt subsidies.

      He pretends he’s fine, he don’t need subsidy, he’s only kidding himself. Why would he be so friendly with Trump then, if not for “u help me, i help u” incentives?

      Like or Dislike: Thumb up 12 Thumb down 21
      • Conan on Jan 24, 2018 at 10:28 pm

        He friendly with trump? Do you even read news bro?

        Like or Dislike: Thumb up 9 Thumb down 1
        • Nothing what u seen or read is exactly what it appears. Elon needs to manage his customer base, which r mostly anti-trump. Anything else, he is just like any other typical businessman.

          Like or Dislike: Thumb up 12 Thumb down 0
  • 12yrsold on Jan 24, 2018 at 12:55 pm

    Now that’s what I called confidence & Boldest statement ever made by anyone in corporate America history even after reported Tesla continues to lose $$$ – at one point last year, it was losing almost half a million dollars an hour.

    I guess even john can talk with this kind of confidence when he has Billions at his disposal Right john !!? Hehehe.

    Like or Dislike: Thumb up 9 Thumb down 12
  • Leafable on Jan 24, 2018 at 1:06 pm

    True leadership and show of business morality.

    Like or Dislike: Thumb up 18 Thumb down 20
    • More like business gamesmanship. Bill Gates too declared he never got a salary from Microsoft for over 30 years, yet how did he became richest man in the world?

      Like or Dislike: Thumb up 27 Thumb down 26
  • What Musk is proposing is hardly new. In fact many owner-CEOs do this in the corporate world.

    Like or Dislike: Thumb up 28 Thumb down 0
  • Why do I get the feeling something is not right with the title chosen..?

    Like or Dislike: Thumb up 2 Thumb down 1
 

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