Under the terms of the agreement, which is subject to shareholder approval, Mr. Musk must remain chairman of the company`s board of directors, although the agreement allows him to become chief product officer and executive chairman with an Executive Chief to report back to him. He said he only saw this as an opportunity if the company became so big that it had to hire a top person to support operations. If Musk were to exercise his shares today at this price, his bank account would obviously not immediately increase by three-quarters of a billion dollars. The agreement stipulates that Musk must hold his shares at least five years after exercising one of the options contained in the plan. In other words, Musk`s potential new wealth would be in the form of illiquidating shares on Tesla, not cash. Tesla`s share price was 805.81 $US when markets closed Thursday, meaning those shares are worth about $1.36 billion $US. But Musk only has to pay a strike price of $350.02 $US per share to get it, under the agreement, or a total of about $591 million – meaning he could pay about $770 million net depending on when he pulls the trigger. It should be noted that the table above is a rough and simplified estimate of what Musk could do as a result of the compensation agreement. As an example of a restriction, the notification describing the agreement indicated that the company regularly compensates other employees with shares or options, meaning that the value of Musk shares will likely be somewhat diluted, with slightly lower stock prices causing additional market capitalization bricks when new shares are created and issued.
The deal was valued at more than $2 billion in a company submitted to the Securities and Exchange Commission, but Musk has yet to make any value and is an excellent example of the complexity of CEO pay. To unlock the second tranche, Musk must also fill additional revenue or profitability bricks, in accordance with the terms set in its executive compensation agreement. Nevertheless, the agreement estimates that the entire package could be worth up to $55.8 billion if the 12 tranches go up. That would prevent Musk from being an already wealthy person in the top category of billionaires. Under musk`s compensation agreement with the electric car maker, the CEO will earn a massive pay day as soon as the company achieves stunning financial and share price targets. Some of these financial milestones have been met and the first of the share price targets was achieved earlier this year, unlocking the first part of its massive compensation plan. Each tranche of options, once deferred, musk entitles you to purchase shares of Tesla shares up to 1,688,670 at a price of $350.02 per share or at the closing price at the time of the agreement.