$58 billion boss salary
Musk Justifies Record Compensation
By Max Borowski
11/17/2022, 09:49 am
A small shareholder doubts that Tesla boss Elon Musk should have earned a total of $ 58 billion in compensation. In view of the company’s development, this is very well justified, company representatives argue. They don’t care if and how much time Musk spends on Tesla.
According to the plaintiffs’ lawyers, it is the highest payment a manager has ever received: the package of stock options that Tesla awarded its boss and major shareholder Elon Musk in 2017 is worth a total of $58 billion if he achieves certain goals in terms of profit, sales and the share price would reach. Thanks in part to this highly unusual payment, Musk has now become the richest man in the world. And while Tesla’s share price has increased more than tenfold to date, benefiting all shareholders, Musk is currently defending his pay in court.
Musk denies the allegations in the process. When the share package was decided, investors thought “that we will fail and go bankrupt,” he said. “We were in a pretty tough position back then, we lost a lot of money,” said the multi-billionaire. “The probability of survival was extremely low.” The auto industry has long made fun of Tesla. “They thought EVs were a joke,” Musk said. Tesla only made the breakthrough with the tremendous success of its Model 3.
The lawyers of the plaintiff, a small shareholder, object to the compensation package on several levels. They claim that the shareholders, who approved the plan with a majority of voting rights, were misled by the Tesla board, a body with similar tasks to a supervisory board of a German company. The supposedly independent board members were actually Musk’s friends or had business ties with the Tesla boss. These would have wrongly suggested to the other shareholders that the targets set for the billion-dollar distributions could hardly be achieved anyway. In fact, Tesla has ticked off a majority of these financial metrics in just a few short years. The decision of 2017 is therefore invalid.
Above all, the plaintiffs doubt that Musk deserved the astronomical reward in the matter. In court, then-chair of the board’s compensation committee, Ira Ehrenpreis, said the compensation package was lavishly designed to motivate Musk to achieve lofty goals. According to the plaintiff, however, this is not very convincing. The performance of his own billion-dollar Tesla stake – about 21 percent in 2017 – should have motivated Musk enough.
Money for Mars
Board members are committed to the interests of all shareholders and therefore must not allow unnecessary expenditure. Therefore, in addition to Musk, the former members of the supervisory board are also among the defendants in the process.
Instead of an appropriate performance incentive, the plaintiff’s lawyers suspect another motive behind the unusual payment arrangement: the board members who were friends with him wanted to help Musk divert billions from the group and put them into his real heart project: manned space travel to Mars. Musk not only repeatedly speaks publicly of his vision of making humanity a “multiplanetary species” and wanting to start flights to Mars. In an email to Tesla’s top lawyer at the time, Musk wrote that he would “use the money for Mars if I’m successful” as part of his compensation negotiations.
The plaintiffs see another point of attack in Musk’s working hours. They doubt that Musk, who already managed the business of several other companies in 2017, was even a real employee at Tesla. The remuneration package does not contain provisions on how much of his time the CEO should devote to Tesla. This was not addressed in the negotiations, according to the board member responsible, Ehrenpreis, in court. After all, there was never any doubt about Musk’s commitment, who at times even slept on the floor in the Tesla factory in Nevada.
Still have time for Tesla?
However, the topic of working hours has gained new relevance in recent weeks. Given Musk’s takeover of Twitter and the chaos he’s unleashed there, it seems doubtful that the manager can even look after his other businesses. He even tweeted himself from the social network’s headquarters: “Will work & sleep here until the organization is put in order”. And a few days ago, at an event on the fringes of the G20 summit, he announced that he had “too much work ahead of him.”
This – while Musk has been working intensively for a long time on the takeover of Twitter, which has since been canceled again, while Tesla’s share price has fallen by around 40 percent in the past two months alone – could play into the plaintiff’s arguments.