Elon Musk became the CEO of Tesla, Inc. (NASDAQ:TSLA) in 2008. This analysis aims first to contrast CEO compensation with other large companies. Then we'll look at a snap shot of the business growth. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.
How Does Elon Musk's Compensation Compare With Similar Sized Companies?
According to our data, Tesla, Inc. has a market capitalization of US$100b, and paid its CEO total annual compensation worth US$2.3b over the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at US$56k. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO total compensation was US$12m. (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).
Pay mix tells us a lot about how a company functions versus the wider industry, and it's no different in the case of Tesla. On a sector level, around 9.9% of total compensation represents salary and 90% is other remuneration. Tesla has chosen to walk a down a path less trodden, opting to compensate its CEO with less of a traditional salary and more non-salary rewards over the last year.
Thus we can conclude that Elon Musk receives more in total compensation than the median of a group of large companies in the same market as Tesla, Inc.. However, this doesn't necessarily mean the pay is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business. The graphic below shows how CEO compensation at Tesla has changed from year to year.
Is Tesla, Inc. Growing?
Tesla, Inc. has seen earnings per share (EPS) move positively by an average of 7.9% a year, over the last three years (using a line of best fit). Its revenue is up 15% over last year.
This revenue growth could really point to a brighter future. And the modest growth in earnings per share isn't bad, either. Although we'll stop short of calling the stock a top performer, we think the company has potential. Shareholders might be interested in this free visualization of analyst forecasts.
Has Tesla, Inc. Been A Good Investment?
I think that the total shareholder return of 84%, over three years, would leave most Tesla, Inc. shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
We examined the amount Tesla, Inc. pays its CEO, and compared it to the amount paid by other large companies. Our data suggests that it pays above the median CEO pay within that group.
One might like to have seen stronger growth, but shareholder returns have been pleasing, over the last three years. As a result of the juicy return to investors, the CEO remuneration may well be quite reasonable. Moving away from CEO compensation for the moment, we've identified 2 warning signs for Tesla that you should be aware of before investing.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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