2018 Tesla Musk 77 Trillion Won Compensation Plan as a Turning Point
CEO Salary Quadrupled to $50 Million Over 5 Years
Stock Options Included, Reduced if Goals Not Met
Elon Musk, CEO of Tesla, secured a massive compensation package from the company in 2018, and since then, similar CEO compensation packages have been increasingly adopted by American companies, the Wall Street Journal (WSJ) reported on the 20th (local time).
According to an analysis of data from public information provider MyLogIQ by WSJ, over the past five years, 36 CEOs of S&P 500 companies have signed compensation package contracts worth $50 million (approximately 6.8 billion KRW) or more. In the five years prior to Tesla’s board approving Musk’s performance-based compensation plan in 2018, only nine CEOs received compensation packages of this scale.
Last year, the highest-paid individual was Hock Tan, CEO of the American semiconductor company Broadcom. The value of his compensation reached $162 million (approximately 220 billion KRW). Following him was Nikesh Arora, CEO of the American security company Palo Alto Networks, with a compensation package of $151 million. In Musk’s case, it is estimated that unexercised stock options recorded gains worth $1.4 billion (approximately 1.9 trillion KRW) last year.
WSJ explained that the compensation packages paid to CEOs by these companies mostly consist of restricted stock or stock options, and the final amount of stock or options a CEO receives varies depending on stock price and financial or operational performance. Broadcom stated in its securities filing that CEO Tan can only receive stock compensation if Broadcom’s stock price reaches certain target levels after October 2025. Previously, Tesla also decided in 2018 to grant Musk stock options in 12 tranches as he achieved stepwise performance goals based on revenue and market capitalization.
There have also been cases where CEOs failed to meet predetermined goals, resulting in significant reductions or complete loss of their compensation. Chad Richison, CEO of Paycom Software, was named the highest-paid CEO in 2020 with a compensation package worth $211 million, but lost most of his stock-based compensation as the company’s stock price declined.
Meanwhile, Musk, who triggered this CEO performance compensation trend, is now at risk of losing both his compensation package and stock options due to a lawsuit filed by a Tesla minority shareholder. In January, a Delaware court halted the approval process of Tesla’s compensation plan, citing serious flaws. However, the court’s final ruling has not yet been issued, and the company is reportedly asking shareholders to reapprove the compensation plan at the upcoming annual shareholders’ meeting in June.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
