The State Board of Administration (SBA) of the Florida Retirement System (FRS) has endorsed Tesla Inc. CEO Elon Musk’s new compensation award. As the manager of the FRS Trust Fund, the SBA oversees over $1 billion in Tesla shares and more than $280 billion in total assets.
A Performance-Driven Incentive Structure
In a recent filing, the agency described the compensation award as a “bold, performance-driven incentive structure” with no guaranteed compensation for Musk. The SBA noted that if Tesla meets all the metrics outlined in the plan, investors will benefit from an incremental value creation of $7.5 trillion. This potential value creation for shareholders outweighs any dilution, as well as the incremental equity award to Elon Musk for each tranche of compensation.
Musk’s Compensation Tied to Shareholder Benefits
The agency defended the package against criticism, citing the opposition from International Shareholder Services (ISS) and Glass Lewis. The SBA pointed out that the 2018 award, which ISS and Glass Lewis criticized, required Tesla to grow from roughly $50 billion to $650 billion in market capitalization. This milestone was achieved by Tesla in just four years. The agency emphasized that Musk’s awards functioned as pure pay-for-performance mechanisms, where he only benefited when shareholders benefited first.
Elon Musk’s Response
Musk took to social media to thank the SBA for its support of the pay package, quoting the update shared by Tesla’s official handle. He expressed his appreciation, saying “Much appreciated!”
Mixed Reactions to Elon Musk’s Pay Package
The trillion-dollar pay packet has received mixed reactions from the market. ARK Invest CEO Cathie Wood and TV host Jim Cramer have expressed their support for the pay packet, with Wood predicting a decisive victory for the award during the upcoming shareholder meeting. However, Gerber Kawasaki’s co-founder Ross Gerber has criticized the package, calling it “insanity” and questioning the independence of the board from Musk’s influence.
Key Takeaways
- The State Board of Administration of the Florida Retirement System has backed Elon Musk’s trillion-dollar compensation package.
- The package is described as a “bold, performance-driven incentive structure” with no guaranteed compensation for Musk.
- Tesla’s potential value creation for shareholders outweighs any dilution and the incremental equity award to Elon Musk.
- Musk’s compensation is tied to shareholder benefits, with the CEO only benefiting when shareholders benefit first.
About Tesla
Tesla Inc. is a leading electric vehicle manufacturer with a current market capitalization of approximately $1.4 trillion. The company has been at the forefront of the electric vehicle revolution, with its CEO Elon Musk being a key figure in the industry.