Elon Musk could end up being paid nothing over the next decade by Tesla, the electric carmaker. Then again, he could receive share awards of as much as $45 billion.
The billionaire technology entrepreneur will be paid only if Tesla hits a series of ambitious growth targets, the company said yesterday. If he hits them all, he will be awarded shares worth as much as 12 per cent of the company.
Mr Musk, 46, has become a prominent figure in the carmaking industry since co-founding Tesla 15 years ago. He has ploughed much of his fortune into the business, believing that it is at the forefront of an electric vehicle revolution.
With a market valuation of about $59 billion, Tesla is worth more than Ford and almost as much as General Motors, America’s largest carmaker. However, it produces far fewer cars than either and has struggled to expand production of the Model 3, its first mass-market electric vehicle.
Under the compensation plan, Mr Musk would be awarded shares worth 1 per cent of Tesla every time the company grew its value by $50 billion. He also would need to hit a further target for either revenue or profitability. This would continue until Tesla was worth $650 billion, or roughly 11 times what it was worth yesterday.
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In an interview with The New York Times, Mr Musk said: “If all that happens over the next ten years is that Tesla’s value grows by 80 or 90 per cent, then my amount of compensation would be zero. I actually see the potential for Tesla to become a trillion-dollar company within a ten-year period.”
Tesla said that the pay plan “ensures that Elon will continue to lead Tesla’s management over the long term while also providing the flexibility to bring in another chief executive who would report to Elon at some point in the future. Although there is no current intention for this to happen, it provides the flexibility as Tesla continues to grow to potentially allow Elon to focus more of his attention on the kinds of key product and strategic matters that most impact Tesla’s long-term growth and profitability.” The compensation plan will be put to a shareholder vote in March.
Mr Musk owns 22 per cent of Tesla, a stake worth nearly $13 billion yesterday. If he hits his targets over the next ten years, he would be left with a holding of as much as 34 per cent, which would be worth $221 billion if Tesla was valued at $650 billion.
Under Mr Musk’s previous pay plan, agreed in 2012, he had the task of growing Tesla’s valuation to $43.2 billion by 2022, among other targets.
Mr Musk earned about $165 million when he sold Paypal, the digital payment company he co-founded, to eBay in 2002. He is worth about $20 billion today. He also has interests in solar energy, space exploration and rapid public transport.