Elon Musk became the CEO of Tesla, Inc. (NASDAQ:TSLA) in 2008. This analysis aims first to contrast CEO compensation with other large companies. After that, we will consider the growth in the business. And finally – as a second measure of performance – we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.
View our latest analysis for Tesla
How Does Elon Musk’s Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Tesla, Inc. has a market cap of US$42b, and reported total annual CEO compensation of US$2.3b for the year to December 2018. While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at US$56k. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO total compensation was US$11m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts – even though some are quite a bit bigger than others).
It would therefore appear that Tesla, Inc. pays Elon Musk more than the median CEO remuneration at large companies, in the same market. However, this fact alone doesn’t mean the remuneration is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business. It could be important to check this free visual depiction of what analysts expect for the future.
You can see, below, how CEO compensation at Tesla has changed over time.
Is Tesla, Inc. Growing?
Over the last three years Tesla, Inc. has shrunk its earnings per share by an average of 4.9% per year (measured with a line of best fit). Its revenue is up 82% over last year.
Investors should note that, over three years, earnings per share are down. But in contrast the revenue growth is strong, suggesting future potential for earnings growth. These two metric are moving in different directions, so while it’s hard to be confident judging performance, we think the stock is worth watching.
Has Tesla, Inc. Been A Good Investment?
With a total shareholder return of 19% over three years, Tesla, Inc. shareholders would, in general, be reasonably content. But they probably wouldn’t be so happy as to think the CEO should be paid more than is normal, for companies around this size.
In Summary…
We compared total CEO remuneration at Tesla, Inc. with the amount paid at other large companies. We found that it pays well over the median amount paid in the benchmark group.
Over the last three years returns to investors have been uninspiring, and we would have liked to see stronger business growth. Considering this, we wouldn’t want to see any big pay rises, although we’d stop short of calling the CEO compensation unfair. So you may want to check if insiders are buying Tesla shares with their own money (free access).
Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
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