In 2008 Elon Musk was appointed CEO of Tesla, Inc. (NASDAQ:TSLA). First, this article will compare CEO compensation with compensation at other large companies. Next, we'll consider growth that the business demonstrates. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Elon Musk's Compensation Compare With Similar Sized Companies?
At the time of writing our data says that Tesla, Inc. has a market cap of US$40b, and reported total annual CEO compensation of US$2.3b for the year to December 2018.
The company noted "Elon actually earned $0 in total compensation from Tesla in 2018, and any reporting otherwise is incorrect and misleading. Unlike other CEOs, Elon receives no salary, no cash bonuses, and no equity that simply vests by the passage of time. His only compensation is a completely at-risk performance award that was specifically designed with ambitious milestones, such as doubling Tesla's current market capitalization from approximately $40 billion to $100 billion. As a result, Elon's entire compensation is directly tied to the long-term success of Tesla and its shareholders, and none of the equity from his 2018 performance package has vested.”
While we always look at total compensation first, we note that the salary component is less, at US$56k. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO total compensation was US$11m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
As you can see, Elon Musk is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean Tesla, Inc. is paying too much. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.
You can see, below, how CEO compensation at Tesla has changed over time.
Is Tesla, Inc. Growing?
Tesla, Inc. has reduced its earnings per share by an average of 4.9% a year, over the last three years (measured with a line of best fit). It achieved revenue growth of 82% over the last year.
As investors, we are a bit wary of companies that have lower earnings per share, over three years. But on the other hand, revenue growth is strong, suggesting a brighter future. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching. Shareholders might be interested in this free visualization of analyst forecasts.
Has Tesla, Inc. Been A Good Investment?
Tesla, Inc. has served shareholders reasonably well, with a total return of 14% over three years. But they probably don't want to see the CEO paid more than is normal for companies around the same size.
Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.