Elon Musk and his $55 billion Tesla bonus package

It has to be said that Elon Musk is a man who attracts media attention like honey attracts bees. This is a businessman who was been there, done it and taken on the establishment time and time again. While Tesla is seen by many as Elon Musk’s “baby” he has many fingers in many other pies all of which have so far proved relatively successful. So, what does the business world think about Elon Musk’s $55 billion 10 year bonus package with Tesla?

Building Tesla from nothing

Many people forget that Tesla was a new entity when Elon Musk took a stake in the business but he was not the only major stakeholder. As his other shareholders fell by the wayside he effectively took on the company by default but he has certainly grasped the opportunity with both hands!

Elon Musk and his $55 billion Tesla bonus package
Elon Musk and his $55 billion Tesla bonus package

Tesla is now a company with a market cap of circa $60 billion despite the fact it has yet to bank a profit in two consecutive quarters. The company has been described as “worthless” by some analysts while others believe it is the game changer that the car industry has been waiting for. We know from past experience that Elon Musk is a man who likes a challenge and is not totally dominated by money. So, what about his latest bonus package?

No salary with a $55 billion bonus carrot

Elon Musk has agreed not to take a salary from Tesla for the next 10 years, instead signing up to a bonus package which could see him receive a $55 billion payout. While there are certain criteria along the way, in simple terms he needs to increase the market cap of Tesla from $60 billion to over $650 billion in the next 10 years. This would make the company larger than the likes of General Motors and move it towards the higher echelons of US business. With a potential $55 billion bonus, in many ways an all or nothing deal, this has obviously attracted significant criticism. So, is it fair?

It is worth noting that Elon Musk is currently the largest shareholder in Tesla with a multibillion-dollar stake. He has already laid his cards on the table, is heavily geared towards the success of Tesla but even agreeing not to take a salary for 10 years will not have an impact on his life. It is worth noting that while $55 billion is an enormous bonus, the highest in US corporate history, shareholders would benefit to the tune of 10 times that of Elon Musk if he does receive his bonus.

Is it just a numbers game?

If the Chief Executive Officer of a company capitalized at $100 million was offered a $100 million bonus if the company reached a market cap of $1 billion in 10 years, would there be as much controversy? In reality it is a numbers game, what you do with $55 billion? Surely for someone to benefit to that extent consumers and customers must pay the price?

In reality, any future growth in Tesla will come about as a direct result of actions taken by Elon Musk. He has been extremely involved in the creation of new vehicles and new ventures within Tesla and this will continue for the next decade. There is scope for him to bring in a new chief executive officer, leaving him more time to get involved with the design side of the business, but time will tell. It is a tall order to increase the value of an, in the eyes of many people, “overvalued company” but so far he’s managed to grow the group to levels which were never thought possible. Would you bet against him?

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