Tesla Awards Elon Musk $23.7 Billion in Stock to Stay Focused
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Tesla approves a stock reward for Elon Musk as an incentive for him to remain as CEO. Plus, how big companies start benefiting from Trump's new federal tax law. And are Americans back on the hunt for a good deal?
When you break out consumer sentiment, you do see that people on the lower end of the income spectrum and in the middle income are feeling a little bit worse than wealthier folks who have more money in the stock market.
It's Monday, August 4th. I'm Alex Ocele for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. Within the rarefied air of CEOs of big U.S. companies, there's a new ultra-exclusive achievement, the billion-dollar year, in which the boss holds stock-based pay that grew in value by at least 10 figures in a single year. They show how today's CEO pay packages can swell far beyond their original valuations. WSJ special writer Tao Francis is here to tell us more. Tao, I actually want to start with Elon Musk. Tesla has granted Musk a new interim stock award that is tentatively valued at more than $23 billion with the promise of more this fall.
This will materialize if the company doesn't win a case before the Delaware Supreme Court. Tesla is appealing an earlier Delaware court decision and validating a 2018 pay package valued at more than $50 billion over 10 years. So, Tao, why did the board approve this new pay package?
Essentially, the board of Tesla is calling this an interim pay package. What they're saying is we want to give him something. We want to reward him for the work he's done. We want to make sure he gets paid. We want to make sure he has an incentive to stick around and stay focused on Tesla. So this is a bit of a stopgap.
Why did Tesla approve a $23.7 billion interim stock award for Elon Musk?
And there's even a clause in it that says that if he gets to keep that enormous 2018 pay package and all the stock options in it, then this one is going to go away.
Zooming out a little bit, last year, just two other CEOs made it to the billionaire pay club, Palantir's Alexander Karp and Broadcom's Hawk Tan. How are these other executives getting to this billion-dollar milestone?
So now we have to jump into the weeds just a bit. Most of the time when we talk about executive pay, we're talking about the grant date fair value. That just means what is it worth when they get it? With cash, that's easy. Cash is cash. It's worth what it is at the end. Equity is more complicated because a lot of the equity that executives get has strings attached to it. So it might be restricted stock that you only get after so many years. That's what this newest interim award is for Elon Musk. It's a two-year vesting period. It means he It doesn't actually get the shares themselves for two years. After that, you have stock options. You have a lot of different complicated mechanisms that can make it easier or harder for the executive to get more or less shares.
The upshot is that you have to put a value on it, and they do that as of the date the equity is awarded. So what happens after that? Well, in the last few years, companies have had to disclose that. And for a few CEOs, a very small number, those changes over time in any given year have gone to 10 figures. And that's what these new disclosures give you a window into.
And it seems like these companies are incentivizing their executives to stay, to be engaged, to work harder for the company so that their share is best, so that they get essentially a greater payout in the end.
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