Elon Musk is working for Tesla for free, but may be paid a salary

For now, at least, Elon Musk is working at Tesla for free. Depending on how you look at it.

Musk still has the potential to continue making impressive sums of money thanks to Tesla, but not the way his regular employees make money.

That’s because the CEO hasn’t received any kind of cash salary since 2019, when he received just $23,760, which was required by California’s minimum wage law.

He became one of the richest people on the planet through lucrative stock option packages that gave him the right to buy hundreds of millions of shares at a fraction of their market price if the company met various financial and value targets. market.

The option package awarded to him in 2012 expired last year after he received 9 out of 10 potential option blocks. And last month, the company disclosed that Musk was awarded the last remaining block of options granted under an even more lucrative pay package in 2018.

So, for now, Musk won’t add to his portfolio, no matter how well Tesla does.

Of course, no one needs to sponsor a GoFundMe page to help pay their bills. After all, he is the second richest person on the planet, according to Forbes’ real-time estimate, behind only Bernard Arnault, head of luxury brand empire LVMH.

Musk has a net worth of around $198 billion, enough money to once again overpay for Twitter if he so chooses.

And the better Tesla does under his leadership, the more he’s worth. He owns 412 million Tesla shares and has options to buy another 304 million at a price of $23.34 per share. Tesla shares closed on Friday at $208.31.

The value of these stocks and options, adjusted for the option strike price, is $142 billion, as of Friday’s close. And while those stocks have dropped 65% in value over the past year, Tesla’s stock has recovered nicely, rising 69% so far in 2023 — enough to add $61 billion to Elon Musk’s net worth.

Still, some believe Tesla’s board could soon announce a new pay package for Musk.

“I would expect an absolutely monstrous package for Musk,” said Daniel Ives, a technology analyst at Wedbush Securities. “I think Musk is the lifeblood of Tesla. He is a key part of the premium in the stock.”

Ives said a new pay package for Tesla’s current CEO would assure investors that he intends to remain at the top of the company for the long term and would not be tempted to shift his focus to Twitter, SpaceX, Neuralink, Boring Company or anyone else. of their companies, or interests.

“The board needs to send a signal; the street needs to have the comfort that Musk will be named CEO of Tesla for most of the next decade,” Ives said.

Some objected to Musk’s pay packages. Tesla shareholders challenged the 2018 deal in a Delaware court, although it was overwhelmingly approved by other shareholders at the time. The judge who heard the case last year has not yet ruled.

Tesla is holding an investor day on March 1 and will soon release its proxy statement to shareholders announcing its plans for an annual meeting.

Tesla’s board could announce its plans for a new compensation package at any of these events — if such a package is coming up.

Musk was last asked about the possibility of a new long-term compensation package on Tesla’s April 2022 investor call, and he dismissed it with the comment: “There are no ongoing discussions for incremental compensation for me.”

Some investors are worried about Tesla losing Musk. At last year’s annual shareholders’ meeting, someone raised the issue of succession, prompting Musk to say, “I intend to stay with Tesla as long as I can be useful.”

“We have a very talented team here. So I think Tesla would still do great even if I got abducted by aliens or went back to my home planet,” he said, before adding, “So I’m not leaving, just to clarify.”

In the federal court case last November, board member James Murdoch testified that Musk chose an individual to be his successor, but did not reveal that person’s identity.

And not all the ultra-rich feel the need to accumulate additional stocks and options to stay involved in growing their companies.

Amazon’s Jeff Bezos and Facebook’s Mark Zuckerberg, for example, acquired large stakes in their companies as founders, but neither has received grants of stock or options since those companies made initial public offerings in 1997 and 2012, respectively.

And, like Musk, they didn’t earn much in terms of salary. Bezos earned an annual salary of $81,000 while he was CEO, and Zuckerberg took home a salary of $1 a year for most of the last decade.

Bezos resigned as CEO of Amazon in July 2021, aged 57, and remains the company’s executive chairman. But with an estimated net worth of around $213 billion at the time, it’s unclear whether any pay package would have kept him in office.