Elon Musk’s New Audacious Plan – May Make Him the Richest Person on Earth, If Tesla Succeeds


Tesla’s CEO, Elon Musk carries a reputation for his ambitious projects and costly bets. He has now put his net worth on the bet! Tesla announced Tuesday that Elon Musk will be paid nothing for the next 10 years, unless the electric car company nearly doubles in value. However, it is important to note that as long as the billionaire is with the company, first as a chairman since 2004 and as a CEO from 2008, he has never received a salary, yet he seems to be doing just fine. Musk, worth $21.5 billion will refuse his annual paycheck of $56,000 – minimum wage in California – in 2018 and for the coming 10 years.

With this new payment plan, Musk could become much richer and so will Tesla’s stakeholders. To earn any compensation, Musk would need to grow Tesla from its current market capitalization of about $59 billion to $100 billion. He will also need to increase the company’s revenue or adjusted earnings by at least 70%. Adjusted earnings are before interest, taxes, depreciation, and amortization. This will be the first level of the 12-level compensation ladder. Achieving this milestone allows Musk to collect stock options worth $1 billion.

Musk has a bigger opportunity than this waiting for him. If he could make Tesla’s marker value reach $650 billion (an 11 fold growth) by 2028 and if other financial measures multiply between 15 to 21 times, then Musk could keep multiple stock options with him, making his net worth $55.8 billion.

If Musk could complete all 12-levels of the compensation ladder, then it will allow him own 28.3% stock options of Tesla, thereby making the CEO of Tesla – the largest shareholder. With such a large stakes of the $650 billion company, Musk’s net worth will grow up to $184 billion in Tesla stock alone – thereby making Musk the richest person in the world.

World’s current richest person, CEO of Amazon, Jeff Bezos, has a net worth of $108 billion. Amazon’s stock option has a lion’s share in his fortune. Musk’s maximum stock option would raise his net worth multifold surpassing Bezos – and this does not consider Musk’s ownership of SpaceX.

Steven Hall, managing director of compensation consulting firm Steven Hall & Partners, said, “It’s breathtaking both in size and in terms of performance required to earn it. Like everything Musk is involved in, whether it’s building a company from scratch or launching satellites into space, this is beyond expectation.”

This new compensation scheme of Musk is a matter of worry for the critics. Since 2012, Musk’s stock awards are dependent on not only Tesla achieving certain market threshold (which it has), but also accomplishing 10 other operational goals, including rolling out the first Model X and Model 3 cars, and producing Tesla’s 300,000th vehicle. However, the new compensation plan makes Musk focus only on increasing sales, profits, and market capitalization and not holding him accountable for meeting or exceeding production quotas. The new compensation plan may also impact the milestones that have eluded Musk yet. For example, the 2012 agreement that musk failed to meet that required Tesla to maintain a gross margin of at least 30% for four consecutive quarters.

Musk has proved critics and skeptics wrong in the past, by achieving more than 1030% in Tesla’s stock over the past 5 years, and going as a far as sleeping in the factory to keep production on track. If Musk achieves the 12 performance milestones of the compensation ladder, then he will earn his place among people like Warren Buffet, Bill Gates, and other richest people in the world.

It is also important to see how Musk’s this audacious project is going to impact his other ventures, including artificial intelligence researcher OpenAI, brain-machine interface developer Neuralink and tunnel digger Boring Co.