Billionaire CEO Elon Musk gets a nine-figure payout as economy sputters

Elon Musk's $775 million payoff comes as billionaires have consolidated their wealth amid the pandemic

By Matthew Rozsa

Staff Writer

Published May 29, 2020 4:20PM (EDT)

Elon Musk, Founder and Chief Engineer of SpaceX (Yasin Ozturk/Anadolu Agency via Getty Images)
Elon Musk, Founder and Chief Engineer of SpaceX (Yasin Ozturk/Anadolu Agency via Getty Images)

A Securities and Exchange Commission (SEC) filing on Thursday revealed that Tesla CEO Elon Musk has received the first tranche of an incentive payout comprised of roughly 1.7 million shares of the company valued at approximately $775 million.

"As of the date of this proxy statement, one of the 12 tranches under this award has vested and become exercisable, subject to Mr. Musk's payment of the exercise price of $350.02 per share and the minimum five-year holding period generally applicable to any shares he acquires upon exercise," the filing declared. As of May 2020 Musk does not draw a salary as Tesla CEO, but instead owns a roughly $24 billion stake in the company equal to roughly 18.5 percent of the total company. At least one Tesla stockholder, Richard Tornetta, claims that Musk's compensation is excessive and is suing the company by alleging that the board breached its fiduciary duty by awarding it to him.

Some experts believe that Musk's compensation plan at Tesla may one day make him the richest man in the world. The plan requires Musk to achieve a series of milestone goals for Tesla; if he does so, he will receive 1.69 million shares of the company, which could be worth billions if Musk is successful. The Tesla CEO described the arrangement as the "most radical in corporate history" and said it is a "10-year CEO performance reward" intended to compensate him solely based on the company's success.

"Elon will receive no guaranteed compensation of any kind – no salary, no cash bonuses, and no equity that vests simply by the passage of time," a corporate press release at the time explained. "Instead, Elon's only compensation will be a 100% at-risk performance award, which ensures that he will be compensated only if Tesla and all of its shareholders do extraordinarily well."

As Salon's Nicole Karlis noted in 2018, Musk became a billionaire by leading a number of unprofitable companies while convincing investors that they had potential.

"To simplify: the path to maybe becoming one of the wealthiest people on the planet starts with losing money; you just have to keep investors' confidence so that they keep pumping money into your company," Karlis wrote. She added that Snap Inc. CEO Evan Spiegel and Twitter CEO Jack Dorsey are also famous billionaires who lead unprofitable companies. In Musk's case, of course, his compensation is now contingent on him achieving profitability.

Income inequality is becoming an increasingly sensitive subject in the pandemic era. A report from Americans for Tax Fairness and the Institute for Policy Studies' Program for Inequality earlier this month concluded that American billionaires increased their wealth by $434 billion between mid-March and mid-May. The top five billionaires on that list — Amazon CEO Jeff Bezos, Facebook CEO Mark Zuckerberg, Microsoft co-founder Bill Gates, Oracle CEO Larry Ellison and Berkshire Hathaway CEO Warren Buffett — saw their combined wealth increase by $76 billion within the two month period covered by the study. Musk himself saw his net worth increase by 48 percent to $36 billion during this period, which did not include the most recent developments revealed by the SEC filing.

By Matthew Rozsa

Matthew Rozsa is a staff writer at Salon. He received a Master's Degree in History from Rutgers-Newark in 2012 and was awarded a science journalism fellowship from the Metcalf Institute in 2022.

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