Elon Musk is already the best-paid CEO in the world. He is also the richest man in the world. Naturally, this led Tesla’s board to introduce a ludicrous pay package that could more than treble his net worth and make him the world’s first trillionaire.
Today, the 423.7 million additional Tesla shares that Musk could acquire are worth “merely” $148.7 billion. If Musk can meet 12 highly ambitious milestones over the coming decade, including increasing Tesla’s overall value eightfold to $8.5 trillion, those extra shares will be his, and will at that point be worth close to $1 trillion.
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This $1 trillion pay package is a bit of a gimmick, and Tesla investors like myself will still get to vote on it come November. It is unique not only in its amount, but also in the fact that it seems to partially be a product of a CEO holding his own company hostage.
Normally the CEO of a car company overseeing a year of disastrous sales numbers, primarily as a result of his political activities that seemed almost intentionally engineered to alienate large swathes of his customer base, would not be up for a big reward. But in negotiations with the board Musk threatened to “pursue other interests” if his demands for a truly historic pay package were not met.
For most of us, I don’t think saying, “Pay me more than anyone else has ever been paid or I will continue to do my job poorly,” would be a very good negotiating tactic. To be fair to the Tesla board, though, they’re kind of between a rock and a hard place. As odious a man as he continually proves himself to be, Musk has achieved borderline miraculous things with Tesla and his other companies before, and keeping him challenged at Tesla might be the best way to keep him out of further forays into politics and social media. That, of course, leaves open the question of what he will do with his additional $1 trillion a decade into the future if he is able to pull another rabbit out of his hat.
This all makes for a troubling moral conundrum. Not for Tesla’s shareholders, or its board, or even Musk himself. It is the job of a company to make money (hopefully at least somewhat ethically), and billionaires are not going to police themselves. No, I place the blame for what is happening to install Musk and others like him permanently at the levers of power squarely on the American voter.
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Look, at the risk of engaging in my own mythmaking here, I do not have a problem with capitalism. I worked my way up from the floor of a meatpacking plant to my investments being almost entirely the source of whatever financial security I have, and sure wouldn’t mind the value of my own Tesla shares being multiplied by eight. And that, in the wake of smashing Victorian era monopolies and regulating financial markets in the early 20th century, is what modern capitalism was supposed to be: providing normal people, working people, with a relatively secure avenue to save and invest wisely and someday have the freedom that participating in well-regulated financial markets provides.
That is, hypothetically, why the capital gains tax rate is less than all but the lowest marginal tax rates for income from working. The theory was that you were already taxed once on your income when you earned it, so you should get a bit of a tax break on the fruits of investing that income.
Instead of such a Utopian vision coming to pass and elevating everyday people, we had a generation of CEOs restructuring their pay to take advantage of every tax loophole know to the savviest tax lawyers of America. We had several generations of Americans kept deliberately ignorant of how the financial markets functioned. Did any of your teachers mention to you even once in high school what an IRA is or how a stock market index fund works? We had big money flood into politics with a wink from a compliant Supreme Court so as to more efficiently spread lies to people to keep them stupid and to keep career politicians busy fundraising rather than advocating for their constituents.
The top marginal tax rate for most of the 1950s was 91%, and it only applied to the portion of a person’s income that was over the equivalent of about $2 million in today’s money. While we do need to go back to higher income tax rates for high earners, what we really need is to levy wealth itself and close the huge loopholes that allow the mega-rich to have a lower overall tax burden by percentage than a grocery store clerk.
This is our own fault. It’s yours and mine. If you want politicians, left or right, to reign in the power of men like Musk, it’s on you to get out there and f*cking demand it.
Ten years is a long time. We can tax the rich. We can levy wealth. We can pay down our national debt. If Musk is getting a $1 trillion payday a decade hence, and we, the U.S. taxpayers, are not capturing a quarter, a third, half of it, then we have all failed yet again.
Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at [email protected].