Analysis-SpaceX links Musk’s compensation to the mission of Mars colonization
Written by Ross Kerber
April 28 (Reuters) – SpaceX’s board approved a compensation plan for founder Elon Musk that has goals for the future and the sky as the company’s ambitions: to colonize Mars and operate data centers in outer space.
Details of Musk’s pay package, which has not been widely reported, were revealed in the company’s confidential registration statement filed in recent weeks with the Securities and Exchange Commission and reviewed by Reuters last week.
The big rewards hanging over Musk by SpaceX show the challenge of capturing the serial entrepreneur’s attention as he prepares to take the rocket maker public. They may set up SpaceX investors to create friction with Tesla shareholders, where Musk is CEO, corporate governance experts say.
Linking science fiction ideas with financial commitment, SpaceX’s board in January approved a pay package for the world’s richest man that will reward 200 million in shares with a high voting limit if the company reaches a market value of 7.5 billion dollars and establishes a permanent human colony on Mars with at least 1 million people, according to excerpts from the company’s registration statement by Reuters.
His Mars-shot performance package gives him up to 60.4 million restricted shares awarded on March 23 if SpaceX meets various benchmarks and operates data centers in space that provide at least 100 terawatts of computing capacity – a large amount of power equivalent to at once. Both awards come with the highest voting Class B restricted stock, which carries 10 votes for every 1 Class A share, and are proportional as the company’s value increases.
Conditional Awards, STOCK OPTIONS
However, he will not receive a single share if the company fails to meet the board’s higher targets, which are not tied to a specific timeline without continuing his employment. He earned a nominal salary at SpaceX of $54,080 per year as of 2019.
The price of the paid package could not be determined as SpaceX kept it private. SpaceX is eyeing an initial public offering in time for Musk’s birthday on June 28, which could value the company at around $1.75 trillion, Reuters reported.
As of Dec. 31, he held 68.8 million in previously awarded Class B stock options with a strike price of about $42 that expire in 2031, allowing Musk to pocket any profit above that amount if he exercises the options before that date.
Musk is already worth $776 billion according to Forbes. SpaceX aside, it could more than double that if it hits separate, ambitious performance goals from Tesla, the EV automaker it runs with. He owned about 20% of the company’s shares as of November, according to a registration statement.
SpaceX and Tesla did not respond to requests for comment. The Information and Reuters previously reported that SpaceX paid Musk a fee linked to the Mars colony and space data centers.
Executive compensation expert Eric Hoffmann, chief data officer at corporate governance consulting firm Farient Advisors, said he knows of nothing remotely comparable to compensation packages at other companies.
SINGLE SPACE INDICATORS
“I’m not a physicist or an astronomer and I don’t know where to start,” he said. “The measuring stick is, has it been done in human history? They haven’t. So that’s difficult.”
Now, SpaceX and Tesla are competing successfully for Musk, Hoffmann said. He noted that last fall, Tesla’s board said it needed to pay Musk generously to keep him focused on the automaker. In fact, Musk threatened to leave Tesla if shareholders failed to approve the plan, Tesla previously disclosed.
“What’s interesting about this situation now is that SpaceX and Tesla, both of which are successfully controlled by Elon Musk, are now demanding attention,” Hoffmann said.
Equity Research Director Courtney Yu also said that the plans to integrate Mars and build space data centers stood out because she could not recall any other company – except Tesla – using more than standard financial metrics such as measures of income or revenue to set CEO pay.
It’s up to the boards of the respective companies, SpaceX and Tesla, to decide how best to organize Musk’s time, Yu said. While SpaceX’s $7.5 billion market cap may seem unusual, Yu said in a phone interview, “it helps set expectations for investors as to what the company’s goals really are.”
(Reporting by Ross Kerber in Boston; Additional reporting by Echo Wang in New York; Editing by Dawn Kopecki and Matthew Lewis)
