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10 sats \ 1 reply \ @HardMoney 6 Feb \ on: What do you think about Elons Tesla compensation saga? econ
If you set wildly insane milestones that hit and make all existing shareholders a lot of value there really isn’t a place to retroactively decide “this is too much”. Most people in 2018 would have thought these milestones were impossible.
From chat gpt:
Elon Musk's compensation package, particularly the one approved by Tesla shareholders in 2018, is among the most notable in corporate history due to its size and structure, which are tied closely to the company's market capitalization and operational milestones. This package was designed not to give Musk any guaranteed salary or cash bonuses; instead, it provided him with the opportunity to earn stock options based on Tesla achieving certain financial and market capitalization milestones.
Here are the key components of the package:
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Market Capitalization Milestones: The compensation plan included 12 market cap milestones, starting from $100 billion, with each subsequent milestone requiring an additional $50 billion in market valuation. For each milestone reached, Musk would earn stock options equivalent to 1% of outstanding shares at the time of the grant.
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Operational Milestones: Alongside the market cap milestones, the package also set out 16 operational milestones related to revenue and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization). These targets were designed to ensure that the company was not just increasing in market value but also growing and becoming more profitable operationally.
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Vesting Conditions: For Musk to vest any of the stock options, Tesla had to meet both a market cap milestone and an operational milestone. This dual-requirement structure ensured that Musk's interests were closely aligned with the long-term success and growth of the company.
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Long-term Commitment: The plan required Musk to hold any vested shares for a minimum of five years after exercising the stock options, further tying his financial interests to the long-term performance of Tesla.
The intention behind this unprecedented compensation plan was to significantly reward Musk for driving Tesla to achieve ambitious and far-reaching goals, essentially betting on the company's success to generate personal financial gain. Critics of the plan pointed out its sheer size and potential cost to shareholders, while supporters argued that it was appropriately ambitious for a CEO who had drastically transformed the automotive and energy industries.
This plan was subject to approval by Tesla's shareholders and was seen as a bold move to secure Musk's leadership at Tesla while pushing the company towards unprecedented growth targets. Since the announcement of this compensation plan, Tesla has indeed reached several of the specified milestones, leading to substantial option vesting for Musk.