back to article Elon Musk offered no salary, $55bn bonus to run Tesla for a decade

“Vertically integrated sustainable energy" company Tesla – more on that description later – has revealed a new compensation plan for CEO and founder Elon Musk that will see him work for nothing but could see him earn US$55 billion over the next decade. Musk will not draw a salary and can’t earn bonuses for time served over the …

  1. TRT Silver badge

    Maths seems a bit bizarre at the start.

    1. AndyS

      Yup. Paragraph 2 makes no sense at all.

      Big numbers is hard for poor journalists.

      1. caffeine addict Silver badge

        Assuming you mean this paragraph (currently para 3):

        But if Tesla hits a series of 12 “Market Capitalization Milestones” starting with the company hitting value of $100bn, up from its current $65bn, then stepping up by $50bn to $650bn, he can score bonuses.

        Then it makes perfect sense. (i=100;i<=650;i+50) is twelve steps. Each of those twelve steps is a milestone for which he will receive an increased bonus.

        1. Clive Galway

          It makes sense, but not *perfect* sense.

          A little clearer would have been something like "up from its current $65bn, then stepping up in $50bn increments up to $650bn"

          As it was, it seemed to be saying that 65+50 = 650

          1. agurney

            "A little clearer would have been something like "up from its current $65bn, then stepping up in $50bn increments up to $650bn""

            No, "stepping up .. in increments" is tautology.

            1. John Robson Silver badge

              > No, "stepping up .. in increments" is tautology.

              Yes, but stepping from 60 by 50 doesn't get you to 650.

              Stepping up in 50s does.

              It's poorly worded, and occasionally the repetition is useful to clarify a point.

              1. TRT Silver badge

                It think it is now worded slightly differently to when I first read it just after 7:30 this morning. I'm not 100% sure, but I suspect the author/editor has added a 12 in front of milestones, because it really looked to me like they added $50bn to $100bn and got $650bn. Stepping up by 50$bn is a single step. "In steps of $50bn" implies a size of increment, and "in steps of $50bn up to $650bn" indicates both the size of the increment and the number of increments. There is a time limit of 10 years, but the company could hit $650bn next week. I wonder if he would get all the individual bonuses if that were to happen? I mean, that would only actually HIT one milestone, although it would have exceeded all the others.

                I think it would be better written as:

                "But he can score bonuses in those 10 years if Tesla hits a series of 12 “Market Capitalization Milestones”, the first if the company increases in value by $35bn to $100bn, then in steps of $50bn up to $650bn.

              2. Goldmember

                Indeed... adding the words "each time" would have made this considerably easier to read.

        2. JeffyPoooh Silver badge
          Pint

          Equally tempered?

          "...twelve steps..."

          Equally tempered? Or Log scale?

          1. rmason Silver badge

            Re: Equally tempered?

            The important thing about 12 step programs, is to be on the program.

            It's just he gets a few billion a time, not a keyring.

  2. macjules Silver badge

    "Build out Tesla’s vehicle product line to cover all major forms of terrestrial transport"

    Nice to see the plans for total planetary transport domination are coming along. Now, about that inactive volcano ...

    1. I ain't Spartacus Gold badge
      Happy

      We'll know that's coming when Tesla announce they're building monorails.

      We all know that monorails have only two uses. 1. Evil lair. 2. Catastrophically boring children at museums.

      1. Steve Davies 3 Silver badge
        Happy

        re: Monorails and Evil Lair

        Aren't you forgetting 'Hyperloop'? That's his monorail and he's got his own tunnelling company 'The Boring Company'.

        Nowt revolutionary with that though (the Boring thing).

        IMHO, his 'evil lair' will be somewhere in the Nevada Desert. Area 51 perhaps?

      2. TRT Silver badge

        re: "Catastrophically boring children"

        Scream emoji.

      3. Solmyr ibn Wali Barad

        "We all know that monorails have only two uses. 1. Evil lair. 2. Catastrophically boring children at museums."

        3. Attempting to bankrupt towns inhabited by four-fingered yellow people.

  3. ratfox Silver badge

    Doesn't he hold so much stock in the company that he will make this much just by raising the market cap? Why the need for additional bonuses?

    1. Alister Silver badge

      Why the need for additional bonuses?

      Well he needs some small change for the meter.

    2. I ain't Spartacus Gold badge

      Well it's either that, or pay him a salary I guess.

    3. Valerion

      I imagine the bonuses are to keep him at the company for the next 10 years.

      And anyway, who would turn down an extra $50bn?

  4. msknight Silver badge

    I get this sinking feeling....

    ... that all he has to do is fool all of the people, for enough of the time.

    We've seen a lot of show, glitz and glamour, but people who know batteries are still asking him to reveal statistics about the power and weight ratios of his trucks, and no one is getting any answers... or so they say.

    Cadogan is a little rough around the edges, but at the heart of the point concerning the truck, I think he has a point - https://www.youtube.com/watch?v=LlvYv1SJJEY

    1. Elmer Phud Silver badge

      Re: I get this sinking feeling....

      It all hinges around the trucks?

      Ever looked upwards?

      1. msknight Silver badge

        Re: I get this sinking feeling....

        As i commented on Cagodan's video... yes, Musk has done some cool stuff, like the rockets and delivering the Australian battery on time... but when you're talking about Tesla itself... the question still holds... where are the stats?

    2. Seajay#

      Re: I get this sinking feeling....

      Surely that's precisely the point of this plan. Unlike every other CEO he can't make money off some short term movement in the share price or by standing still and collecting a salary.

      For Musk to agree to this plan he has to believe that the company is going to be fantastically successful over a long period because if it's not he doesn't get paid. If he thought it were all smoke and mirrors then he'd go for a high salary and make sure that there was a great severance package written in to the contract.

      This is a clear and expensive (therefore trustworthy) signal that he believes it's going to change the world.

      Whether it actually does change the world is another question, but he clearly believes it.

      1. inmypjs Silver badge

        Re: I get this sinking feeling....

        "but he clearly believes it"

        He is a con man and you have been conned.

        1. I ain't Spartacus Gold badge

          Re: I get this sinking feeling....

          inmypjs,

          if Musk is a conman - explain SpaceX.

          Just because Tesla might fail - that doesn't make him a conman. That makes him a businessman who solicited inestment for a risky venture. He'd be a conman if he didn't believe that he could make it work - but carried on anyway.

          Businesses fail all the time. Others succeed.

  5. Ledswinger Silver badge

    Will Tesla be independent for that long?

    The devil is always in the detail, personally I don't think Tesla will be a standalone company by 2028, and the detail will be what governs Musk's final tally. Although the plan requires both operational and stock value milestones, in a "change of control situation" only the stock value counts. So he'd already have the full value of bonuses already awarded, sale of his current stock (as largest single shareholder), and then if he's found an investor willing to pony up $650bn, then he collects all $55bn bonuses - so he gets 8% of the total value. Not many directors are on that sort of generous incentive. In current prices the world's largest takeover was Vodafone/Mannesmann at around $300bn, in the febrile tech market of the US, $650bn doesn't seem impossible over the next ten years.

    Another thought is that the bonus thresholds are not (on my causal reading, and search on terms "index" and "inflation" either inflation or stock market index adjusted. So just on 3% annual increase he'll hit the first performance milestone in the decade doing next to nothing.

    1. James Hughes 1

      Re: Will Tesla be independent for that long?

      But who has that amount of money to buy a car company against their wishes?

    2. I ain't Spartacus Gold badge

      Re: Will Tesla be independent for that long?

      Tesla is considered to be "over-valued". In the sense that its market cap is way higher than you'd expect from its revenue. Which obviously makes sense if everyone expects the company to be making lots of money in the future.

      However, that makes it much less of a tempting takeover target. Normally you're either trying to get a company cheap because the markets have totally under-valued it (say the Glazers buying Manchester United), or you're trying to buy one that's cheap because it's doing badly and you believe you can turn it around.

      The other option, where price is less important, is when you're trying to build on synergies between your companies (so you can sack loads of staff), or just want to massively boost your market share. What car company can afford to absorb Tesla?

      1. Mark 85 Silver badge

        Re: Will Tesla be independent for that long?

        I agree on all points. I do think that Tesla is still targeting the high-end market. For Tesla to hit those lofty goals in sales they need some vehicles for mainstream market and priced accordingly. When Tesla starts building for mainstream then, and only then, will it come out of the niche it's created for itself.

        If he can pull off a "Henry Ford" and mass produce cars/trucks, etc. for the masses, then Tesla will make it, otherwise it's just another high-end market company making toys for the wealthy.

        1. HamsterNet

          Re: Will Tesla be independent for that long?

          Guess you missed the Model 3. OK so it's struggling to get built, but still, its BMW 1M performance for less than a Golf.

          1. rmason Silver badge

            Re: Will Tesla be independent for that long?

            @HamsterNet

            That is *exactly* the point.

            We didn't miss the model 3, it's just not a real thing yet. It's some concept CGI stuff and promises.

            When we are all buying them instead of (insert hatchback of choice) *then* we will see.

            You've unintentionally hit the nail on the head. Those that 'believe' do so off the back of not much evidence, those that don't think he's a fraud. (see the current debate regarding the trucks re plausibility and cost).

            If we all start buying Teslas he will have either cracked it *or* he will have found a new subsidy fund to suck dry. Time will tell.

            I hope he's the real deal, we need people like him and stuff like this. it won't be governments that drive big developments in our life/tech, it'll be some crazy bastard billionaire who drives the next big push.

            1. I ain't Spartacus Gold badge

              Re: Will Tesla be independent for that long?

              I don't think it's fair to call Musk a fruad. SpaceX should prove that. They've done some very hard engineering stuff - but also in a very practical way. In stages. They aimed for re-usable rockets, but planned to that it didn't matter if that tech could be made to work, they still had a viable business and workable tech. Maybe he's used PR and hype - but you can't argue with his results so far.

              Similarly Tesla isn't all hype. It's got some happy customers, but it's not the real deal. But then he couldn'd do what he did with SpaceX here. Electric cars may never work.

              At the moment they have a small niche, which other technologies may eclipse - and the potential to become much more than that. But I don't think it's clear to anyone what the long-term future of transport (or the energy sector in general) will be.

              We currently have a working oil infrastructure. But it's expensive and risky, as it relies on the Middle East politics and causes climate change.

              But we've got nothing to replace it. Battery tech isn't yet up to the job, but could become so "any day now". Or not. Even if it does, that's no panacea, as we'll then have to radically change our electricity infrastructure to be able to cope with the power needs of transport. Doable, but expensive and time consuming.

              Maybe fuel cells are the solution? But creating a hydrogen economy to fuel them is even more expensive than upgrading the electricity sector.

              Or we could end up with some other tech like flow-batteries or a cleaner hydrocarbon, perhaps in tandem with all cars becoming hybrids for maximum efficiency.

              But even if Tesla fails, that doesn't make it fraud. If we can't get the battery tech to make it a success - that doesn't mean it wasn't an honest attempt.

  6. unwarranted triumphalism Bronze badge

    Don't you mean...

    The Lord and Master has thought up a new tax dodge ?

  7. DougS Silver badge

    Why doesn't he base it on ability to actually make cars?

    Given that the issues they are having with getting the model 3 to mass production, the stock price is based mostly on hype right now. For the company to actually be successful, they have to find a way to fix their production issues.

    1. James Hughes 1

      Re: Why doesn't he base it on ability to actually make cars?

      Indeed, Which is why they are fixing the production issues.

      This is the bit I don't get when this is continually brought up. They have loads of people working endless hours sorting out the productions issues. Do people actually think they WONT sort them out, that they will encounter some intractable problem? Seems horribly unlikely to me. Production line are a solved problem, they take time to get up to speed, but they (almost) always get where they need to be.

      1. inmypjs Silver badge

        Re: Why doesn't he base it on ability to actually make cars?

        "Do people actually think they WONT sort them out"

        I think they are incompetent. The build quality of their cars isn't good the model X is shit. Having enough money to burn $ half a million an hour month after month lets you cover up an awful lot of incompetence.

        They probably will sort them out, the question how much grief customers have to put up with and can they sort them out and still make a profit.

      2. Aitor 1 Silver badge

        Re: Why doesn't he base it on ability to actually make cars?

        As far as I know, they are on 1000 carss per week, or 52.000 cars/year, the current reduced target was 1800 per week,or 93600.. we shall see, I would say 100.000 model3 cars per year will be achieved tis year..

        According to the wakipedia

        "Tesla's initial target for making 5,000 vehicles per week was March 2018[22][23] but by early 2018, that was carried over to the end of June"

  8. Russell Chapman Esq.

    Too many projects

    He is trying to focus on growing several newish companies at the same time. Sure he is smart, but it seems like he is spreading himself too thinly across all these businesses.

  9. juice Bronze badge

    Sounds like Tesla's standard Smoke and Mirrors approach...

    If you announce enough new and interesting things, they tend to help distract people from the old and potentially broken things. All you have to do is to keep finding ways to produce more of the new & shiny...

    After all, Elon Musk doesn't need any more money from a personal perspective, and I'm guessing that it'd be just as hard to funnel more money into new pet projects, given how many he's already got on the go.

  10. inmypjs Silver badge

    So basically he will be...

    rewarded for continuing to find bigger fools to invest in Tesla and lift its market cap to new levels of stupidity.

    I expect existing shareholders will approve the plans, with no chance of making a profit finding bigger fools is their only option.

  11. John Smith 19 Gold badge
    Unhappy

    The "Silcon Valley" business plan seems to be.

    1) Do the bits that have already been done better than before.

    2) Pray something turns up to make the bits you promised work.

    Sometimes it works. Sometimes it does not.

    1. I ain't Spartacus Gold badge

      Re: The "Silcon Valley" business plan seems to be.

      It's a perfectly valid way to innovate. One of the reasons our economies have grown so massively over the last few centuries is that free market economics allows lots of failures. Given how hard it is to predict the future - there's always going to be failure. You just need enough companies to succeed, to make it worthwhile. Sometimes even the failures produce useful stuff, which can be bought cheap by someone else and make a contribution.

      SpaceX is interesting, because they were viable if their innovation of re-usability hadn't come off. Now that it looks like it has (though obviously we'll need a few more years to demonstrate that), they're even further ahead.

      Tesla is risker. It relies on improvements in battery tech, and I'm not sure if it can be viable without that. Other than as a niche sports car boutique I guess. But it's not like a 50-100% improvement in battery storage is totally unrealistic, we've been getting 5% extra capacity a year for quite a while now - and there's probably more research going on than ever.

  12. Anonymous Coward
    Anonymous Coward

    Just a house of cards...

    Musk built all three of his current businesses by using U.S. tax payer money. Tesla has never made a dime in profit despite all of the gullible investors and media hoopla. Tesla blew millions of his own money on Tesla Motors and he has had to continually go back to the well to get more money to maintain operations while Tesla is being sued for model S deaths due to their auto pilot issues. The model 3 is months late and production volume low. Tesla is burning through a billion in cash per quarter and is already seeking more sucker money.

    Musk's planned 30,000 units per month sale of model 3 is a pie-in-the-sky pipedream because there isn't that many dumbass consumers world wide for EVs. GM is happy to sell 35,000 EVs annually yet Musk thinks he can sell 30,000 per month. A lot of gullible investors are going to lose their shirts when the house of cards finally crashes and burns. Let's not forget Space X's recent failures either. Musk is running out of time and money at an alarming rate. How long can he B.S. the media?

    1. HamsterNet

      Re: Just a house of cards...

      The thing is He has 500,000 of pre orders, each coughing up $1000 for a place on the queue. That's what 14 years worth of GMs electric car sales.

      Just shows the market is really there, if the other car companies could just produce something with the performance and range to match an Tesla (also helps if it doesn't look appealing Heres looking at you Toyota and GM),. Problem is it's remarkably difficult to do that, more so when you just use off the shelf bits and Tesla has a DECADE headstart and isnt slowing down its R&D.

      yes lots of marketing hype, but there is real product hitting the markets, late, but still hitting them.

    2. I ain't Spartacus Gold badge

      Re: Just a house of cards...

      Anon,

      You can't just handwave and dismiss SpaceX because they blew one of their rockets up. Tesla might still be a work in process (and may fail) but SpaceX have arrived. Maybe he'll screw it up and waste that potential, but so far they look to be just powering on.

      They are already one of the cheapest ways of getting medium weight payloads to orbit. They're testing a new rocket this month to get them into the heavy payload category. They've managed to land and re-use rockets - in a way that's never been done before - and the savings from that give them vast growth potential.

      And they're not really taking subsidies from the US government. Tesla might operate on subsidies - but SpaceX get paid for doing actual stuff. That's not a subsidy, it's revenue. OK, NASA have worked it so there's a promise of money in advance (and some paid up front that might be lost) - but then they're asking for companies to develop new technology that doesn't yet exist, so that's fair enough. Most of the money gets paid only if the tech succeeds. So SpaceX now get paid a commercial rate to deliver to eh ISS. If their manned capsule works, they'll get the same for that.

  13. rmason Silver badge

    Yes.

    He has the pre orders.

    The issue is when those units are delivered how far off Tesla are from managing to deliver those units at a profit. That's when it becomes a real company, one that makes a profit and not a loss and *that* is what the share price gamble is all about. He's delivering products but at HUGE losses. If they are 10 years off making cars for the masses at a profit, they are needing another decade of funds at their current burn rate.

    1. I ain't Spartacus Gold badge

      Tesla might fail. People invested in a start-up, that's what they do. So what?

      The proposal here is to pay him nothing if he fails, and lots-and-lots if he succeeds. Given investors have already put their money into Tesla, that's a win-win for them. Either their losses don't increase, or they get a slightly smaller share of the potential profits.

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