South African Billionaire Elon Musk Agrees To What May Be The Boldest CEO Pay Plan in US Corporate History

FOR A SELF-MADE billionaire, Elon Musk doesn’t seem to know much about making money—at least not for himself. The Tesla CEO’s new compensation package, announced Tuesday, hinges on Musk’s ability to transform the budding automaker into one of the world’s most valuable companies by producing long-term increases in market value, and revenue and profits.

Musk will be paid in stock options, which will vest over ten years in a series of 12 tranches. To secure each, Musk must reach a pair of milestones, one related to Tesla’s market value, the other to its revenue and profitability. With every tranche, the target market value goes up by $50 billion. If he can hit all 12 targets and grow Tesla’s current value of $59 billion to an astounding $650 billion, his stock award could be worth $55 billion.

The way the arrangement is structured, each milestone is a blunt instrument: He either reaches it or gets nothing.

“If all that happens over the next 10 years is that Tesla’s value grows by 80 or 90 percent, then my amount of compensation would be zero,” he said. (His calculations were based on the stock price at the beginning of this year when the company was worth about $50 billion.)

Still, he contended, “I actually see the potential for Tesla to become a trillion-dollar company within a 10-year period.”

If Mr. Musk succeeds in hitting some of his benchmarks, it would also mean that the company’s employees, including those who work on the factory floor, who get paid in both cash and stock, could become wealthy.

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