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Elon Musk is worth the huge salary he's demanding – but here's why his investors should say no anyway

Elon Musk speaks after the Falcon Heavy rocket last month: Joe Skipper/Reuters
Elon Musk speaks after the Falcon Heavy rocket last month: Joe Skipper/Reuters

If anyone could be said to be worth a $2.6bn pay package, it’s Elon Musk.

Tesla, his electric car company, has taken more than a few knocks of late. But it still boasts a higher market valuation than that of General Motors, despite recording less than two per cent of the latter’s output.

It has achieved this and become one of America’s top brands in less than a decade as a public company, thanks largely to the Elon Musk brand, gobbling up billions of investment dollars, not to mention grants, subsidies and a stack of goodwill on the back of it.

If that absurd sum is what it takes to keep the guru on board, some big investors reason with a vote on it looming, then let him have what he wants.

For their CEO to get the full package, the company will have to hit a market value of around $650bn, more than ten times its current $54bn and change, in ten years. If it does that, his $2.6bn share based package (some estimates have it higher) will be worth a dizzying amount of money. But his investors’ returns will have been so stellar they won’t much care.

This is one of those vanishingly rare instances where the CEO is genuinely irreplaceable, all the more so if you consider the formidable challenges Tesla faces. Musk says its mission is to encourage competition in the electric car market and against that metric it can be judged a major success. The big established car companies are all trying to rival it. But they don’t have him. So yes, Musk might be worth the money. That doesn’t change the fact that the package is hugely problematic.

Elon Musk sold his investors on a dream. He told them he was going to revolutionise the transportation market and create a super company in the process.

Have bought into it, they are now being asked to pay a second time. The way this package has been presented to them; it looks a bit like a shake down. The subtext: pay the man or he’ll be off on his next project before you know it. Without him you’ve got jack.

This argument misses the point that Musk holds 20 per cent of Tesla’s shares. A good chunk of his fortune is tied up in the thing. So he has a lot more to lose than his big institutional investors, with their vast and sprawling portfolios. He would take a much greater hit through losing interest than they would.

So would his personal brand and thus his other projects, such as SpaceX, which aims to put human beings on Mars.

I binge watched National Geographic’s docudrama Mars at the weekend. Musk was by far the most interesting character in it (character development being a notable weak point of the drama part). His passionate commitment to Martian colonisation – despite the formidable obstacles – was clear. The kid in me who read Arthur C Clarke novels growing up was almost swept away by it.

Would Musk really put that, and his many other projects, at risk by letting Tesla crash through not getting his way on pay?

His investors have a stronger bargaining position than some of them appear to think they have. They should, serve their clients by saying no as the big shareholder advisory services have urged them to, and not just because they have the power to do so.

The real danger posed by Musk’s proposed package is its potential impact on other CEOs, who will look at what he’s getting and say “I want that too”.

Very few of them can hold a candle to Musk. The majority don’t even come close.

Most owe their jobs not to raw talent, chutzpah, and entrepreneurial genius, but to their ability to climb the corporate greasy poll, to a certain amount of luck, and often to the right background too.

A disturbing number of them prove they really aren’t very good at business when they’re put to the test. You only need to consider a couple of the other recent big business stories to see that.

Toys ‘R’ Us once disrupted an entire market, only for its bosses to fail to adapt when that market was disrupted by others. They woke up too late to the fact that their stores had become joyless warehouses with hard faced staff searching bags on the way out when the kids were clicking on to their parents’ Amazon accounts via their tablets.

Or how about contractor Carillon. Don’t even get me started on the people who ran that business into the ground. The depths of their failures are still being revealed. The UK Financial Reporting Council has just announced an investigation into two of its former finance chiefs.

Many more top bosses are just plain average. Grey men (they’re still mostly men) who run companies that look more like big bureaucracies than they do Musk style entrepreneurial enterprises, with much of the decision making farmed out to colourless committees focussed on risk mitigation.

Their bosses mostly make millions rather than billions. Musk’s package is an outlier in that respect. But if Musk and his boardroom allies get what they’ve asked for it will only encourage others to do the same. People who are not Musk. People who are replaceable because they always are replaced.

The average tenure for a UK FTSE 100 CEO is, for example, less than five years according to PricewaterhouseCoopers.

If investors say yes to Musk, the chances are they will say yes to these people when they ask for more too because they always have in the past.

Musk is visionary. A dreamer. He may yet secure the future of humanity if he can get people living sustainably on a planet other than earth, something the late Stephen Hawking was a powerful advocate of. His work encouraging environmentally friendly technologies could help secure our species’ future on this planet.

But at the same time, he’s setting the worst possible example to an insatiably greedy corporate elite whose members takes their inspiration from the L’Oreal ad and have little to offer humanity other than its slogan – because I’m worth it – when they are not.