Elon Musk’s new Tesla compensation package is the CEO equivalent of putting your money where your mouth is: He’ll only be paid out if he manages to raise the value of Tesla as a company to certain milestones, kind of like Kickstarter project stretch goals on a grand scale.
Per the New York Times, Musk’s compensation will start at zero, and will increase based on incremental targets beginning at a $100 billion market value threshold, with boosts coming at every $50 billion increment after that, going all the way up to a total valuation of $650 billion for Tesla. Put in perspective, the company is currently worth just under $60 billion based on its share price.
Musk’s compensation, should he hit these targets, will be paid out in the form of stock awards, and under the terms of the deal, even once his awarded shares vest, he has to hold them for five more years prior to selling in order to satisfy the conditions of the agreement. That means he can’t do anything tricky like artificially inflate the value of the company in the short-term in order to profit personally.
This isn’t a drastic departure from Musk’s existing plan, as the Times points out. Instead, it’s structured very similarly, but with much larger market value targets to hit. If Tesla can manage to make the top one, for instance, it’ll be among the highest valued companies in the world. Even so, Musk managed to meet all but the very highest of his payout thresholds for that plan.
The pay plan seeks to keep Musk around for the long haul, and it works out for shareholders because the only way they pay out is if the Tesla CEO delivers. It’s definitely good news for fans of Musk and what he’s done with Tesla thus far.