Shareholders of Tesla (TSLA) have authorized a hefty pay package for CEO Elon Musk, but with strings attached. The $2.6 billion package features a performance-based stock option award that comes with a dozen market capitalization milestones and 16 operational milestones. For every milestone achieved, Musk receives Tesla stock worth 1%.
The plan could generate over $50 billion for Musk over the next decade provided he stays with the electric car making company as executive chairman or CEO or chief product officer. The initial milestone includes bringing Tesla’s market value to $100 billion from the current $53 billion. For every $50 billion gain, Musk will get stock options until the market cap reaches $650 billion.
Although Tesla has not reported a single profit in 15 years and despite the production delays on its Model 3 electric car, stockholders do not seem deterred. Let’s face it, Elon Musk is a man with a plan, and he has big and dynamic plans like space projects and hyperloops.
These dynamic plans involve Tesla too and investors know it. In spite of the current losses and cash burn, investors are hopeful of the significant opportunity that lies ahead. If Tesla achieves success on its electric cars and renewable energy projects, it will gain extreme value and will be propelled to great heights.
The current plan will also make sure that the visionary Musk stays with Tesla and gives his due attention to the company. The remuneration plan had its share of detractors too. Some advisory firms disapproved the plan over concerns of high costs and stock dilution. They also opined that even if Tesla didn’t sustain its profitability, Musk would get a hefty remuneration.
However, the majority of Tesla investors were in favor of paying Musk more. They appear to have faith in their CEO and in the long-term potential of Tesla.