Earlier this week, shares in Tesla Inc. the electrical automotive large lead by CEO Elon Musk, have been evaluated at simply over $330 billion (U.S.) on the New York Stock Change.To place this quantity in perspective, it’s equal to the joint market value of Canada’s huge 6 banks, or about 3 times the market value of Common Motors, Ford and Honda mixed.Whereas it’s debatable whether or not the market is assessing Tesla appropriately or whether or not it’s a bubble about to be burst, one factor is for certain: the expertise, imaginative and prescient and keenness of the charismatic, out-spoken — some say genius — entrepreneur who has led the corporate since 2008 are key to its success. For that, Musk needs to be rewarded.However how precisely ought to he be compensated for his management position?Paying a good-looking remuneration for a profitable and devoted CEO might be a good suggestion for any firm. Ensuring that the precept of pay-for-performance is stored and verifying that the CEO isn’t rewarded for luck can be essential.However because it seems, the compensation package deal that Musk acquired at Tesla is unparalleled to something seen earlier than. Impressed, one may say, by the identify of one other firm Musk is main – SpaceX.Again in January 2018, when Tesla’s value was about $85 billion, Musk was awarded a 10-year compensation plan which has the options of a online game.In keeping with the plan, there are 12 totally different milestones (tranches) that Musk may attain, or “unlock,” and his compensation is tied to these milestones. The primary milestone (which was lately met) is for the corporate to have a market value of $100 billion. From there, every subsequent tranche is $50 billion greater.The phrases of Musk’s plan require that the market value of the corporate for every threshold, for instance, $100 billion, be stored on common for at the least 6 months. If the situation is met, Musk turns into eligible for choices equal to 1 per cent of the variety of shares excellent, or about 1.69 million choices. Musk may train every choice at a price of $350 a share.To offer an instance, if the present share price of Tesla is $1,500 a share, and every choice permits Musk to purchase one share at $350, every choice is worth $1,150.If all goes in line with the plan, and Musk clears the final tranche – a market value of $650 billion for Tesla – he will likely be granted in whole simply over 20 million choices. This interprets to a staggering 10-year compensation of $55.2 billion (or $5.5 billion yearly).To be clear, that is simply Musk’s present compensation contract. As well as, he already owns 38.7 million shares or about 21 per cent of all excellent Tesla shares worth about $60 billion at present market price.To grasp how outrageous and disconnected from actuality Musk’s potential most annual pay of $5.5 billion is, a couple of comparisons are required:The median compensation for an worker at Tesla was $56,163 in 2018. Musk may make about 100,000 occasions that quantity yearly.The common pay of the highest 100 highest-paid Canadian CEOs in 2018 was $11.eight million (CND) in line with a latest report by the Canadian Centre for Coverage Alternate options. Musk may make 630 occasions that quantity yearly.The median CEO compensation for the biggest American companies, these listed within the S&P 500 index, was $12.eight million (U.S.) in 2018. Musk may make 431 occasions that quantity yearly.America’s high earner – Alphabet Inc.’s CEO Sundar Pichai – acquired a surprising $281 million in 2019. Musk may make 20 occasions that quantity yearly.How may anybody justify such a pay?How can Musk justify it to himself? Does he actually consider that he ought to get a contract worth about twice the annual GDP of Nepal, a rustic with a inhabitants of 28 million folks?Furthermore, the truth that neither Musk nor the board of Tesla see match to contemplate modifying the stratospheric compensation package deal within the midst of a world pandemic with historic excessive unemployment charges, exhibits how disconnected they’re.The corporate is defending the plan utilizing a typical capitalist argument: “Elon’s compensation will be 100 per cent aligned with the interests of our stockholders.” That’s, if the share price goes up, shareholders can’t complain.However for a corporation that’s bragging about creating a greater, sustainable world, and aspires to be instrumental in making a inexperienced future, focusing solely on shareholders and share price is just not what you’d count on. What about different stakeholders? What about values associated to fairness and social justice?Get extra enterprise in your inboxRead the enterprise information and evaluation that issues most each morning, together with the most recent on what the coronavirus means for you, in our Star Enterprise electronic mail e-newsletter.Signal Up NowSure, create incentives, however $55 billion is extreme.Elon Musk’s “performance award” is just outrageous. The truth that he doesn’t see that is disappointing. It additionally units an inflated and problematic benchmark for different corporations about to supply compensation plans to their CEOs.However with strain from activist shareholders, institutional traders and regulators, this may change. In spite of everything, Tesla is a public firm, and its abnormal shareholders shouldn’t sponsor what appears to be a pissing contest between Elon Musk and the richest particular person on this planet Amazon CEO Jeff Bezos.JOIN THE CONVERSATION Anybody can learn Conversations, however to contribute, you need to be registered Torstar account holder. If you don’t but have a Torstar account, you possibly can create one now (it’s free)Signal InRegisterConversations are opinions of our readers and are topic to the Code of Conduct. The Star doesn’t endorse these opinions.