Is Elon Musk Worth a $44.9B Pay Package?

For a company’s top executives, such as the Chief Executive Officer, Chief Financial Officer, and other senior executives, financial renumeration and benefits usually include salary, bonuses, stock options, and other equity-based pay.   The standard for establishing executive compensation is that it be” fair, reasonable, and transparent” (Perego). But what is considered fair and reasonable is subjective and often the topic of many heated debates.  Some consider executive compensation to be excessive. According to the Economic Policy Institute, in 2022, CEOs received “more than 344 times the average salary of production and nonsupervisory workers” (Bivens and Kandra). Others contend that executive compensation pay packages are necessary to attract and maintain top talent, as it is increasingly difficult to hire an effective CEO.  This is especially important in industries where the average yearly turnover exceeds 50%.   

It’s not just the number that matters.  Ethics and inequality can be negatively influenced by executive compensation. Excessive CEO pay, defined as compensation that is 20% or greater than the national average, has contributed to growing inequality as the concentration of earnings at the top of an organization amounts to fewer gains for ordinary workers.  This equates to the income disparity between executives and employees as it widens the gap between the rich and the poor. The excessive salaries of senior executives can also result in decreased motivation and employee satisfaction as employees may believe that their efforts are not valued and that that their compensation is unfair.

And then there’s Tesla CEO’s Elon Musk’s pay package. Always one to “push the envelope” and never one to shy from controversy, the determination of Elon Musk’s salary came after many years of advertising efforts, shareholder voting, and court rulings to eventually be approved at $44.9 billion (Krisher). Interestingly, Musk’s response to this pay package: an exclamatory “Hot damn, I love you guys” to the cheering room of Tesla shareholders and employees. Musk’s compensation package of $44.9 billion is the largest award to a CEO of a U.S. public company. It’s also far greater than any other Chief Executive Officer, dwarfing Tim Cook of Apple and Ted Sarandos of Netflix. The compensation package is based exclusively on stock and rewards Elon Musk for hitting predetermined milestones that raise Tesla’s market value, pretax income, and revenue. His pay package is structured to deliver several rounds of stock options that will allow Musk to purchase 304 million shares of Tesla stock. In addition, Musk also never fails to remind his critics—by tweeting, of course—that he does not take a cash salary or bonus and “the only way for him to pay taxes personally is to sell stock” (Morrow).

How does Elon Musk’s compensation package compare to other well-known CEOs? To compare, “the median pay package for an S&P 500 U.S. CEO last year was $16.3 million” (Krisher), which equates to an S&P CEO’s pay package being 275 times less than Elon Musk’s, even after working for 10 years and multiplied by 10. Other well-funded compensation packages like Apple CEO Tim Cook and ex-CEO Ted Sarandos are overshadowed by Musk at $63.2 million and $49.8 million respectively.   To truly understand the magnitude of Elon Musk’s compensation package, consider that the annual pay of a non-CEO Tesla employee is $45,811.

Is Elon Musk’s $44.9 billion pay package worth it? That would depend on what he actually achieves as CEO of Tesla, not what he says he’s going to achieve.  In other words, we’ll have to wait and see.