Tesla Ready to Give Elon Musk a $2.6 Billion Pay Package

Tesla Ready to Give Elon Musk a $2.6 Billion Pay Package

Tesla Ready to Give Elon Musk a $2.6 Billion Pay Package

Tesla Inc (NASDAQ:TSLA) has approved CEO Elon Musk's pay package, according to sources close to the company.

For example, for the first tranche of options to vest, Tesla's market valuation would have to reach $100 billion and achieve either $20 billion in revenue or $1.5 billion in earnings before interest, taxes, depreciation and amortization, after adjusting for stock compensation.

Votes on the compensation plan will be cast at a special shareholder meeting in Fremont, California, at 9 a.m. local time.

But while the company's largest shareholders approved the plan, corporate governance groups Glass Lewis and Institutional Shareholder Services (ISS) came out strongly against it. Musk's net worth was valued at $14.2 billion.

In order to receive the highest award, Tesla would have to be worth more than 12 times as much as General Motors, the US's largest vehicle manufacturer, is today ($52.9bn). Its shares have fallen 18.5% since hitting an all-time high in September.

Compensation for the CEOs of large U.S. companies is typically approved by around 95 per cent of votes cast in annual "say on pay" advisory votes. As a result, the award indicates that Musk has other ideas for the company, including transforming energy storage through utility-grade applications and the kinds of future-of-mobility plans outlined in his Master Plan, Part Deux.

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Supporters have said the plan will align Musk with shareholders and potentially greatly increase the company's value.

Tesla Inc.'s shareholders will answer that question Wednesday, as the board seeks their approval to give Chief Executive Officer Musk an unprecedented 10-figure award of stock options. "Given the size of the award, we believe the potential dilution to shareholders is just too great".

In 2017, Tesla's Ebitda stood at $528.5 million and revenue at $11.76 billion, according to Thomson Reuters data.

California State Teachers' Retirement System (Calstrs), the second-largest pension fund in the US, said it did not support the plan, citing concerns about potential dilution and an absence of profitability goals. "CalSTRS is one of the nation's largest public pension plans but only the 59th largest investor in the vehicle maker, with a 0.13% stake".

"Even when annualized, Musk's pay opportunity would dwarf that of almost every CEO at the largest and most profitable public companies. In addition, we have concerns about the lack of focus on profitability for the company, and the one profitability metric that is used excludes the cost of stock-based compensation". The company now is trying to raise production to meet demand of its Model 3, a mass-market electric auto that starts at $35,000.

Musk will not receive any salary, cash bonuses, or equity that vests "simply by the passage of time", Tesla's board said in the filing. "I got my 30-year-old girlfriend Jana pregnant and we had a baby son, who is now ten months old", he said.

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