Finance | August 4, 2021 2:07 pm

The Way Elon Musk Gets Paid, Once Considered “Radical,” Is Becoming the Norm

The Tesla CEO led Bloomberg’s Highest Paid Executives list by over $6 billion

Tesla CEO Elon Musk holding a white hard hat while visiting a new electric car factory in Germany near Berlin in May 2021. He was the highest paid executive in the US in 2020 according to Bloomberg.
Tesla CEO Elon Musk visiting a new factory in Germany in May 2021.
Christophe Gateau/picture alliance via Getty

Back in January of 2018, Tesla was worth about $59 billion, the more affordable Model 3 was still trying to ramp up production, and CEO Elon Musk had recently agreed to stay at the helm of the electric car company for at least another 10 years. As a New York Times story detailed, Musk made that decision partly because of his drive to achieve great things. The other part of his mental math? The company had decided to pay him an astronomical amount of money, but only if Tesla reached certain financial milestones.

“If Mr. Musk were somehow to increase the value of Tesla to $650 billion — a figure many experts would contend is laughably impossible and would make Tesla one of the five largest companies in the United States, based on current valuations — his stock award could be worth as much as $55 billion (assuming the company does not issue any more shares over the next decade, which is unrealistic),” the paper wrote at the time. 

So, experts, how do those hats taste?

Today, Tesla is worth more than $700 billion, and in the last year has reached a market capitalization of over $800 billion, which made it the fifth most valuable company in the country (Tesla has also issued more shares since 2018, just to note the full range of unfulfilled predictions). As such, the compensation plan, which the Times called “perhaps the most radical in corporate history,” has indeed played out, leading to about $33 billion in paper gains, according to Bloomberg. 

But we know Elon Musk is insanely rich. That’s not news. What may surprise you, though, is that his “radical” compensation package is now becoming the norm among U.S. CEOs, according to the latest edition of Bloomberg’s Highest Paid Executives rankings, which was released Wednesday.

“At least 15 company leaders got Musk-like awards worth $100 million or more last year — up three-fold from when the Tesla Inc. founder got his,” Bloomberg writes. “Moonshot copycats are appearing in some fairly staid places, like Restoration Hardware, Paycom Software Inc. and JPMorgan Chase & Co.”

When you peruse their list of the top 10 highest paid CEOs and executives from 2020, you’ll have a hard time seeing the salary portion of their compensation. The highest salary on that list goes to Tim Cook of Apple at $3 million. But as for the awards, in the form of stocks and options, those were in the hundreds of millions for every single executive. Musk leads the list by over $6 billion compared to the second place finisher, with a total compensation last year just under $6.7 billion. 

One reason more companies are offering these ludicrous payouts is because they can seem like a win-win situation: if the CEO does drive up the company value, then it doesn’t matter if they get a flabbergasting bonus because everyone else is cashing in too. There’s another reason, however, as detailed by Bloomberg:

“Mega grants can ripple through industries. That’s because public companies must detail their CEOs’ rewards in public filings. The transparency was meant to rein in extravagances. But it also made it easy for executives to look at how much rivals get — and seek more.”

In other words, CEOs see what Elon Musk is doing and they want in. And we’re not talking about his efforts to save the planet.