Elon Musk works for Tesla for free but that could change

New York () — At least for the moment, Elon Musk is working for free at Tesla. Depending on which perspective you see it from.

Musk still has the potential to continue to make staggering sums of money from Tesla, but not in the way that his regular workers make money. That’s because the CEO hasn’t received any kind of cash salary since 2019, when he only received $23,760, which was required by California 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 for a fraction of their market price, if the company met various financial and value targets. market.

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

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 a real-time estimate from Forbes, behind only Bernard Arnault, head of the LVMH luxury brand empire. Musk has a net worth of around $198 billion, enough money to once again pay too much for Twitter if he wants to.

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

The value of those shares and options, adjusted for the exercise price of the options, is $142 billion, based on Friday’s close. And while they fell 65% in value last year, Tesla shares have rebounded nicely, rising 69% so far in 2023, enough to add $61 billion to Musk’s net worth.

Still, some believe that 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 soul of Tesla. It’s a key part of the premium in stocks.”

Ives said a new pay package for Musk would reassure investors that he intends to stay on top of Tesla for the long term and not be tempted to shift his focus to Twitter, SpaceX, Neuralink, The Boring Company or anyone. from your other companies or interests.

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

Some have opposed Musk’s pay packages. Some Tesla shareholders challenged the 2018 deal in a Delaware court, even though shareholders overwhelmingly approved it at the time. The judge who heard the case last year has yet to rule on the case.

Tesla will celebrate 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 those events, if it comes at all.

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

Some investors worry that Tesla will lose Musk. At last year’s annual shareholder meeting, one raised the question of succession, prompting Musk to say: “I intend to stay at Tesla for as long as I can be useful.”

“We have a very talented team here. So I think Tesla would still do very well even if he was abducted by aliens or returned to my home planet,” he said, before adding, “So I’m not leaving, just to be clear.”

In the federal court case last November, board member James Murdoch testified that Musk had chosen someone to be his successor, but did not reveal their identity.

And not all of 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, both took large stakes in their companies as founders, but neither have received grants or stock options since those companies had initial public offerings in 1997 and 2012, respectively.

And, like Musk, they haven’t earned much in the way of salary. Bezos earned an annual salary of $81,000 while he was CEO, and Zuckerberg has taken home a salary of $1 a year for most of the past decade.

Bezos stepped down as Amazon CEO in July 2021, at age 57, and remains the company’s CEO. But with an estimated net worth of around $213 billion at the time, it’s unclear if any pay package would have kept him on the job.