Elon Musk’s Compensation Sets Unprecedented Record Compared to Other CEOs and Tesla Employees

The median pay package for a U.S. CEO last year was nearly 200 times the salary of a typical employee at their company, yet Elon Musk’s Tesla compensation far exceeds even these figures.

On Thursday, Tesla shareholders voted to reinstate Musk’s 10-year pay plan, valued at $44.9 billion in April. This plan, which is entirely stock-based, had been initially approved by the board and shareholders in 2018. It rewards Musk for achieving specific milestones, including increases in Tesla’s market value, pretax income, and revenue. However, Tesla’s stock has since fallen by about 25%, reducing the plan’s worth.

Previously, a Delaware judge had invalidated the package in January, citing flaws in the approval process and Musk’s influence over the company’s board. The court had noted that shareholders were not fully informed. Despite this, Tesla maintains that Musk’s compensation is justified due to his pivotal role in making Tesla the leading electric vehicle manufacturer globally and significantly increasing its market value.

Although the recent shareholder vote supports the pay plan, Musk cannot access the stock options immediately. Tesla plans to ask the judge to reconsider the earlier ruling. If unsuccessful, the company is expected to appeal to Delaware’s Supreme Court, potentially prolonging the process for months.

Regardless of the final decision, Musk’s compensation package is the largest ever granted to a CEO of a U.S. public company. Comparatively, the median pay for an S&P 500 CEO last year was $16.3 million. Over a decade, this would amount to $163 million, making Musk’s earnings 275 times higher.

In her January ruling, Delaware Chancellor Kathaleen St. Jude McCormick highlighted that Musk’s package, valued at $56 billion at the time, was 250 times larger than the median pay plan for peer CEOs.

Among individual CEOs, Hock Tan of Broadcom Inc. was the top earner in the Associated Press’s survey, with a package valued at $162 million at the start of fiscal 2023. Due to a rising stock price, Broadcom later valued Tan’s package, plus older options, at $767.7 million. Even this substantial amount is dwarfed by Musk’s potential haul of 304 million shares, worth nearly $45 billion.

Other high-earning CEOs in the survey included William Lansing of Fair Isaac Corp ($66.3 million), Tim Cook of Apple Inc. ($63.2 million), Hamid Moghadam of Prologis Inc. ($50.9 million), and Ted Sarandos of Netflix ($49.8 million).

While Musk technically received no compensation last year due to not exercising any stock options, his potential future earnings could be immense if his compensation package is upheld. According to Tesla’s proxy filing, the median annual pay for a non-CEO Tesla employee last year was $45,811, underscoring the vast disparity in earnings within the company.

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