Elon Musk’s Pay Tied to $600 Billion Increase in Market Cap

By Douglas A. McIntyre Updated Jan 12, 4:14AM EST · Published Jan 23, 4:47AM EST

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Elon Musk’s Pay Tied to $600 Billion Increase in Market Cap — © courtesy of Tesla Inc.

It seems impossible that Tesla Inc. (NASDAQ: TSLA) could have one of the largest market caps of any company in the world. It needs to add $600 billion sometime in the next 10 years for its CEO and founder, Elon Musk, to get any significant payout as CEO.

The auto company said:

Tesla today announced a new 10-year CEO performance award for Elon Musk with vesting entirely contingent on achieving market cap and operational milestones that would make Tesla one of the most valuable companies in the world. In order to fully vest, Tesla’s market cap would have to grow to $650 billion (an increase of almost $600 billion), and important revenue and profitability goals would also have to be achieved. The award is modeled after Elon’s 2012 performance award, which helped bring about a more than 17-fold increase in Tesla’s market cap in the five years after it was put in place.

Musk will not receive a salary, cash bonus, or stock awards simply because he is Tesla’s CEO. The comp pack is based on long-term vesting, as well as financial success:

The performance award consists of a 10-year grant of stock options that vests in 12 tranches. Each of the 12 tranches vests only if a pair of milestones are both met.

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Market Cap Milestones: To meet the first market cap milestone, Tesla’s current market cap must increase to $100 billion. For each of the remaining 11 milestones, Tesla’s market cap must continue to increase in additional $50 billion increments. Thus, for Elon to fully vest in the award, Tesla’s market cap must increase to $650 billion.

Operational Milestones: To meet the operational milestones, Tesla must meet a set of escalating Revenue and Adjusted EBITDA targets (the only adjustment to EBITDA is for stock-based compensation). These milestones are even more directly aligned with shareholder value creation than those used in Elon’s 2012 performance award. They are designed to ensure that as Tesla’s market cap grows, the company is also executing well on both a top-line and bottom-line basis.

Microsoft Corp. (NASDAQ: MSFT), which has the second highest market cap of any U.S. company after Apple, is at $660 billion.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.