It is probably the highest compensation that a senior manager of a listed multinational has received in the history of capitalism. But everything or almost everything that surrounds the American Elon Musk is tinged with spectacularity, not a little extravagance and, without a doubt, controversial.
On Tuesday of last week Tesla, the automobile company controlled by Musk and of which he is its chief executive, held its shareholders’ meeting. In the documentation that was delivered to the company’s partners and that is registered with the SEC, the United States market regulator, among the clarifications and explanations that are given about results, market shares, income, assets, liabilities and dividends reserves not a little space to detail, justify and specify the overwhelming and hyper-billionaire compensation package in shares that the company designed in 2018 for its CEO.
The company reveals that on the date of preparation of the document delivered to its shareholders “all the milestones” provided for by the performance council in the company have been reached and certified (among other things, capitalization, results, unit sales, market share) and Accordingly, the 12 tranches comprising the “2018 CEO Performance Award representing options to acquire a total of 303.96 million shares of Tesla have become exercisable, subject to payment by Elon Musk of the fixed exercise price ($23.34 per share) and conditioned on the five-year minimum retention period generally applicable to any shares you acquire by exercising the right to purchase.”
This means that Elon Musk has to pay his company a whopping 7,094 million dollars, as the exercise price, to obtain the aforementioned share package. A package that at the closing price of last Friday’s session on the US Nasdaq is valued at 54,755 million dollars. For comparative purposes only, the 303.96 million Tesla shares have a value similar to that of two ‘telephone and a half’ or a little less than the current market capitalization of Banco Santander.
It is true that Musk will not be able to sell them in five years, but by the time he executes the entire package, he will have an additional 9.6% of the automotive giant’s current market capitalization in his possession.
In its annual report, the company reviews the compensation system that Musk has traditionally enjoyed at the company. It’s actually the board’s remuneration committee that ensures that both the 2018 CEO Performance Award, now closed in 2023, and the performance-based stock option award given in August 2012 were focused on creating incentives for Musk to “continue to help create successful results in the future.”
The company recalls that in addition to working as chief executive since October 2008, Elon Musk “has contributed significantly and actively to Tesla, since our first days in April 2004, recruiting executives and engineers, contributing to the design and engineering of vehicles, raising capital, attracting investors and increasing our public visibility.”
Since the founding of the company, Musk received from Tesla a base salary that, according to the company, “reflected the minimum salary requirements established by California law and was subject to income taxes.” However, Musk resigned in 2019 to receive any salary. And before the stock option awards he received in December 2009, Musk had no stock compensation for five years.
But in 2010 and 2011 he also did not receive shares as compensation for his work. And it was so because the council considered that the assignments granted in the aforementioned December 2009 “already provided sufficient motivation for Musk to fulfill his duties.”
It was not until 2012 and on the occasion of the placing on the market of Tesla cars; Model S and planned Model X and Model 3 programs, the company granted Musk stock options to acquire 79.12 million shares, which at the time represented 5% of the company’s issued and outstanding shares.
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