latest automotive news, best new and used cars, find a new car ab416_4334237247_08af133b4b_b-610x407 Tesla Shareholders Confirm Musk’s Money Tesla

Tesla investors approved an incentive package on Wednesday that could ultimately net CEO Elon Musk around $56 billion. There is a catch, however. He has to elevate the company’s share price to almost comically high levels. Having already covered the deal, we noted some opposition from analysts, but not shareholders — all of whom seem overwhelmingly happy to oblige Musk if he improves their wealth, as well.

Investment advisor Glass Lewis Co. said offering the CEO an additional 12 percent in stock options (currently valued at around $2.6 billion) was unnecessary since he is already a major shareholder and the move could dilute value for other investors. But most agreed Musk was too important to risk losing and agreed to the package to keep him in charge of the company, despite Musk stating this was his intent all along.

Whether or not Musk sees the big $55.8-billion payday is up to him and chance, however. He doesn’t reap the rewards of the package until Tesla nearly doubles its present market cap. After it hits the $100 billion mark, he becomes eligible for the stock options — which are split into 12 tranches separated by $50 billion. If Musk manages to elevate the market cap to the astronomical goal of $650 billion, he gets the whole hog. If he doesn’t break the initial barrier of $100 billion, he gets nothing.

According to Reuters, shareholders approved the compensation package on Wednesday during a special shareholder’s meeting in Fremont, California. As the final tally is not yet official, the source did not specify the number of votes for or against. But Tesla should make an announcement soon.

Is it a smart plan? We’re not day traders or market analysts, so we cannot say anything with supreme authority. But Musk has certainly been good for the company’s share price thus far. Under his leadership, its valuation has increased tenfold since 2013 and investors hope he can do the same over the next ten years. Still, a market cap of $650 billion would make Tesla one of the highest-valued companies in existence and might be unrealistic.

Ideally, Musk’s reward would be linked to a handful of reasonable production goals, too. Tesla is still having trouble meeting Model 3 volume targets and, while the automaker promises production will be on track before the end of the month, it’d be nice to have some assurance that it was a priority. Tesla is an innovative organization and great at grabbing attention, but its productivity (or lack thereof) will eventually influence its share price. The Model 3 has to nudge the company into profitability if Tesla wants 10 years of unbridled gains on Wall Street.

Then again, there are plenty of tech companies with ludicrously high stock valuations that only occasionally operate in the black (like Amazon) or hardly ever left the red (like Twitter). Furthermore, while overall profitability remains important for automakers, it isn’t like the old days. Making money isn’t enough; there’s also an increasing emphasis on bolstering a company’s share price.

If you don’t believe us, just ask Elon Musk or Mark Fields. The former runs a currently unprofitable business with a perpetually rising stock valuation while the latter oversaw a profitable automaker for three years and was fired because investors weren’t happy with the company’s declining share price.

[Image: OnInnovation/Flickr (CC BY-ND 2.0)]

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