Tesla shareholders overwhelminglymulti-billion pay package to founder and chief executive Elon Musk for the next decade, even though some corporate governance experts argued the pay package wasn't in shareholders' best interests.
Under the terms of the plan, Musk will receive about 20.26 million stock options and no salary or bonuses if he meets certain conditions. The 46-year-old entrepreneur is required to remain chief executive officer or executive chairman and chief product officer through each "vesting event" — 12 separate milestones for Tesla's market capitalization.
Those milestones must be achieved in conjunction with one of 16 operational metrics based on revenue and adjusted earnings. Musk also is required to hold the options for five years after they are exercised.
Tesla (TSLA) estimates the potential value of Musk's options grants at $2.62 billion. That figure eclipses the median value of performance-based compensation for CEOs of large-cap companies, according to Equilar, an executive pay consulting firm. Musk's pay also would dwarf the $786.5 million that Blackstone Group CEO Stephen Schwarzman, the top earner in the sector, took home last year.
Glass, Lewis & Co., a proxy advisor, pegs the value of the package at $3.7 billion based on a different valuation method than the company used. If Musk meets all of Tesla's targets, his haul could top $55 billion.
That said, the performance targets are ambitious. For example, Tesla's market capitalization would need to hit $100 billion this year, while generating $20 billion in revenue or $1.5 billion in earnings before taxes, interest and other items. That's well in excess of the $11.8 billion in sales and $528.5 billion in pre-tax earnings it earned in 2017. Tesla's market cap is now roughly $53 billion.
Glass Lewis and another proxy firm, Institutional Shareholder Services, both urged shareholders to vote against the proposal, saying the costs outweigh the benefits.
"Mr. Musk's current holdings reflect over $11 billion in personal exposure to the company's share price performance, and yet one of the largest single equity grants on public record is required to keep him focused on the Company that he founded even absent a commitment of full time and attention," Glass Lewis said.
Despite that recommendation to investors, the plan received the backing of some of Tesla's biggest shareholders, T. Rowe Price and Baillie Gifford. Critics of Musk note that the company has yet to earn a profit and has $10 billion in debt.
"If he doesn't make the stock price go up he gets nothing in the end," Steven Hall, an executive compensation expert, told CBS MoneyWatch. "He's only going to get money if he grows the company and shareholders reap the rewards. .. It's probably one of the better-aligned programs out there.
Musk, whose fortune is estimated by Forbes at $20 billion, also runs the private spaceflight company SpaceX and the Boring Company, which is developing his futuristic Hyperloop system.