Tesla outlined a potentially massive – and massively unconventional – compensation plan for its unorthodox CEO on Tuesday, setting a series of ambitious growth targets that, if various conditions are met, could theoretically net Elon Musk as much as $55.8 billion over the next decade, launching him to the top in rankings of the world’s richest people and dwarfing the size of past CEO stock and options grants.
The unusual package is based entirely on performance, guaranteeing no salary and no bonus, and requires Musk to reach aggressive market capitalization and financial goals in order to be paid. He would also have to hold onto his shares for five years after he receives them before selling, a rare stipulation that’s viewed as particularly shareholder-friendly.
Yet compensation experts said the biggest message Musk’s new pay plan may be designed to send is not just that Tesla intends to take an unusually performance-driven approach to paying its CEO. It’s that the company has galaxy-size ambitions for its growth and aims to rival the planet’s largest tech companies over the next decade. Musk would only receive the full payout if the company reaches a market capitalization of $650 billion, a more than ten-fold increase over its current $59 billion market cap, a future valuation that clocks in just under the size of Microsoft’s value today.
Dan Marcec, director of content for the executive compensation and governance research firm Equilar, said the primary purpose of the plan’s design may not be solely to tell investors how Tesla plans to pay its CEO. “The message is we’re really aggressive with our goals and we want to make it to the level of Facebook and Microsoft and Google and Apple with our market size,” he said.
Tesla, which declined to comment beyond its news release and regulatory documents, said in a filing that “our aspirations may appear ambitious to some, and impossible to others, and that is by design. We like setting challenging, hard-to-achieve goals for ourselves, and then focusing our efforts to make them happen. This is why we based this new award on stretch goals and why we gave Elon the ability to share in the upside in a way that is commensurate with the difficulty of achieving them.”
The news arrives while Tesla remains in the throes of “production hell,” a phrase Musk used last summer to describe the months-long manufacturing crucible that would result in the creation of hundreds of thousands of Model 3s, the company’s first mass-market vehicle. Nearly six months later, the company has yet to emerge at the other end, the result of “robot calibration issues” at the Fremont, California auto assembly plant and other challenges at Tesla’s “Gigafactory” battery plant in Nevada.
Those issues have dramatically delayed the Model 3 rollout, so much so that even ardent fans of the company have begun to wonder about Tesla’s long-term viability and Musk’s ability to set realistic goals. For months last year, Musk said he expected Tesla to produce 5,000 Model 3s a week by the end of 2017, a deadline he later pushed back to March. The company has now pushed that number back to June.