Tesla is set to release its fourth-quarter earnings on Wednesday, and while there may be many questions concerning electric vehicle pricing, demand, and profitability, one particular issue that has captured attention is CEO Elon Musk's pay. The question arises as to whether Musk's management skills and vision are truly worth an additional $30 billion. However, even Musk himself might find it difficult to justify such a hefty sum. Interestingly, Tesla's board does not necessarily have to grant him this astronomical amount to meet his demands.
Recently, Musk stirred up controversy with a tweet mentioning the possibility of moving his AI and robotics projects away from Tesla if he did not obtain 25% voting control of Tesla stock. As it stands, Musk owns approximately 13% of Tesla stock and holds stock options representing an additional 7%. Acquiring an additional 5% would equate to around $34 billion, based on the current stock levels.
The extent to which Musk considers his various options regarding control remains unclear, as both he and Tesla have chosen not to respond to inquiries regarding these tweets. The fact is that for any CEO, $30 billion is an extraordinary figure, even when it comes to someone like Musk.
In 2018, Musk was awarded roughly 300 million stock options tied to specific performance milestones, making him one of the highest-paid CEOs in history. To date, finding a CEO who earns more than Musk has been challenging. Evaluating CEO compensation is an imperfect task. Musk's options are set to expire in 2028. On one hand, the board granted up to 30 million options per year for a decade. At the time, this equated to approximately $700 million annually. However, given the current stock prices, the value of this award has soared to nearly $7 billion per year.
How does Musk's compensation compare to other CEOs? Apple CEO Tim Cook, for example, is worth around $2 billion and has held his position for over 12 years. This amounts to an estimated annual income of roughly $167 million.
When Tesla announces its fourth-quarter earnings, it will undoubtedly shed more light on these pressing matters. As discussions surrounding electric vehicle pricing and demand continue, the subject of Musk's pay will certainly remain a topic of great interest.
The Compensation Conundrum: Musk vs. Reality
It's no secret that executive compensation can be a contentious issue, and when it comes to Elon Musk, the disparity between what is reported and what is reality is staggering. While Musk's reported compensation has averaged around $70 million per year over the past three years, these figures fail to capture the full story.
In truth, the top CEOs of the largest and most valuable companies in the U.S. have been earning nine-figure salaries annually in recent years. Musk, on the other hand, has gone against the grain by earning zero - a far cry from the astronomical figures his counterparts are accustomed to.
However, Musk's audacious demands cannot be easily justified when compared to industry standards. In light of this, the board of directors faces a challenging decision. One potential solution is to introduce a new class of super-voting stock solely for Musk's benefit. This approach, although unconventional, has been seen in the car industry before. For example, shares held by members of the Ford family carry an impressive 36 votes per share.
If the board chooses to pursue this avenue, it would require a shareholder vote, as amendments to the certificates of incorporation necessitate approval from shareholders. However, if the vote is in favor, the possibilities are wide open.
Ultimately, allowing shareholders to grant Musk more control over Tesla without burdening the company with additional billions in stock-based compensation may be the most prudent path forward.
How this compensation drama will unfold remains uncertain. Only time will tell what the future holds for Musk's remuneration at Tesla.
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