The disparity between the median U.S. CEO pay and that of Elon Musk is staggering. While the median CEO pay last year was 200 times more than a worker in the middle of their company pay scales, Musk’s 10-year pay plan, valued at $44.9 billion, overshadows them by comparison. This all-stock package, approved in 2018, rewards Musk for achieving milestones such as raising Tesla’s market value, pretax income, and revenue. Despite a Delaware judge previously ruling that the approval process was flawed due to Musk’s control over the board and lack of information provided to shareholders, the shareholders recently voted in favor of reinstating the plan.
Musk’s compensation is significantly higher than that of other CEOs of U.S. public companies. For instance, the median pay package for an S&P 500 CEO last year was $16.3 million, which when extrapolated for a decade of work would amount to $163 million. In comparison, Musk’s package would be 275 times greater. The top earner in the AP survey, Hock Tan of Broadcom Inc., had a package valued at about $162 million at the start of fiscal 2023, which surged to $767.7 million due to a rising stock price. However, Musk’s potential haul of 304 million shares worth almost $45 billion far exceeds that.
Potential Controversy
While Musk did not receive any compensation last year because he did not receive any stock options, his pay package, if approved, could potentially make him one of the wealthiest CEOs. Calculating Musk’s potential annual pay for last year is challenging, as the company reported that he received nothing. However, if his compensation package is validated by the court, his pay is expected to be in the billions. In contrast, the median annual pay of a non-CEO Tesla employee last year was a mere $45,811.
The lavish CEO compensation culture raises questions about income inequality within organizations and the overall value placed on executive leadership. It also highlights the legal and ethical challenges associated with approving such extravagant pay packages. The case of Musk’s compensation plan being initially rejected by the court further underscores the need for transparency and accountability in corporate governance. The prolonged legal process to reinstate the package also adds a layer of complexity and uncertainty to the situation.
The exorbitant compensation awarded to CEOs like Elon Musk is a glaring example of the disparity between executive pay and that of the average worker. While Musk’s innovative contributions to Tesla’s success cannot be denied, the sheer magnitude of his pay package raises ethical and practical concerns. It is crucial for companies and stakeholders to reevaluate their approach to executive compensation to ensure fairness and sustainability in the long run.