No, Really, Elon Musk Did Not Make $2.3 Billion From Tesla Last Year


Business Insider tells us that Elon Musk got paid $2.3 billion last year to be the CEO of Tesla.

No, really, Elon Musk did not get paid $2.3 billion to be CEO of Tesla last year. Not even close.

Business Insider tells us this because the New York Times said so, because they were told so by Equilar. And no, this is not correct – it’s Equilar who have their measure of CEO compensation wrong.

According a report on CEO compensation in 2018 from The New York Times, Tesla CEO Elon Musk was paid nearly $2.3 billion last year.

This isn’t true. It comes from some stock awards earlier:

Tesla’s shareholders have voted to approve a new 10-year compensation plan for CEO Elon Musk valued at around $2.6 billion in stock options, according to multiple outlets. Musk won’t get the full value in one lump sum, and he might not even get all of it.

That was the decision to make the award. The year Equliar is looking back at is the year in which the award crossed the accounts of Tesla. But the mistake they’re making is to think that the accounting value in the books of the company is what is paid to Elon Musk. It ain’t.

Firstly, and obviously, it’s a multi-year award. It doesn’t go to Musk in one year. Secondly, if the stock price doesn’t do certain things then Musk gets nothing. As Kevin Williamson points out:

The study he cites calculating the median pay increase for the 200 highest-paid CEOs is defective as well. It lists Musk’s change in pay at 4,575,310 percent and his total compensation at $2,284,044,884 — the figure that Eavis himself acknowledges that Musk is unlikely to actually realize.

As I’ve noted about the Equilar pay reports before:

They’re including in pay the value of the stock awards. But sometimes those stock awards pan out to be worth nothing at all. But we don’t see corrections going back, do we? What we see counted is the value of the awards as expressed in the corporate accounts, not how the awards actually pan out.

And here’s a simple test of the point. If Musk were paid $2.3 billion last year he’d be facing a roughly $1.15 billion tax bill (in California, yes). So, is that the way that a savvy company will pay a savvy CEO? No, it’s not, is it?

They’ll be paying him in something that ends up qualifying for long term capital gains tax at what, 20%? 28%? instead. Something you can’t do if you hand someone a check, you can only do that with long term stock awards. So, we think Musk accepted his pay at a 50% tax rate? Do we ‘eck.

Thus he didn’t earn $2.3 billion last year, did he?

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> They’ll be paying him in something that ends up qualifying for long term capital gains tax at what, 209%? 28%? instead.

I’m fairly certain that 209% is a typo…