His $55 billion pay package would pay $100k per year for the 14k employees he just laid off for the next 40 years.
I’m surprised the stock is still north of $100.
I’m surprised the stock is still north of $100.
You would need to convince the shareholders to give stock compensation to the employees and convince the employees to be paid in stock instead of dollars.
Startup people are primed to think that cash accounting is what's actually important for a company in terms of doing things, going bankrupt, etc. It largely is for startups. For large companies, however, it's actually the opposite: cash accounting is a sort of boring task left to the accounting department, whose job is usually to keep a minimum amount of cash lying around, and your balance sheets and income statements are actually what determines your access to business opportunities.
So whats your point? Because regular employee pay sure as shit does.
You said it's incorrect, and then in the next sentence stated how it is correct.
Yes, Tesla has shares on it's balance sheet. Yes, giving out those shares is a loss in assets. But doing mark-to-market and calling it cash is a bit of woo-woo because no, shares are not cash and they don't become cash until shareholders hand over that cash.
Here is a thought experiment: Tomorrow investors just decide to stop buying Tesla stock, and the price goes to zero. Mass brain control or something. The share price just sits at zero. No buy orders anywhere.
The company still sells cars. They still have cash coming in. They still can pay suppliers and pay employees. There is profit and everything. The people paid with shares though are screwed. Their compensation is zero. Why is it zero? Because shareholders aren't giving their cash for shares.
Also, the situation you just described isn't a $0 share price, it's an illiquid market. That's very different. Aside from being practically unreachable to any company with a positive enterprise value.
This isn't some sort of hypothetical libertarian fantasy land where cash is all-powerful and all other economic assets are just worthless paper that can be thrown around. Your scenario might as well say that every company is worthless because that's not cash either, and the same mass-psychosis might hit Google. Most public companies can live for about 2-3 weeks in the situation you just described, even the ones with massive cash reserves, because of how corporate finance works in the real world.
But shareholders still bear the cost of CEO compensation. Whether Elon gets paid 100 shares or 100,000,000 shares, the company still has the same amount of (actual) money to pay employees.
This really is not difficult to grasp.
I can flip the though experiment around to "People completely stop buying all Tesla vehicles and products, but the brain damaged Muskites, swept up in his announcement of a time machine, drove the stock up to $10,000." Now there is a situation where Musk's compensation would be in the trillions, but the company itself would be cutting employees left and right.
Employees aren't paid with stock. So stop comparing stock compensation to cash compensation.
The practical reality for public companies is that cash and stock are pretty much fungible. You can issue shares and give them to Musk, or you can issue shares, sell them on the open market, and get cash to pay your employees. If you have excess cash, you can buy back shares from the open market. Companies actually frequently do this - most of them have a department called the "treasury" which, among other things, day trades their own stock (within limits set by public announcements) in order to get cash at a good price - but you never hear about it.
$1 of stock and $1 of cash are roughly equivalent in actual value. In both cases, the shareholders are dilluted by $1 extra.
Company revenue is in trouble? Just do an offering! Stocks = cash! Surely ownership is fine with bankrolling dead weight.
Also, I'm not arguing about the approval of the compensation package.
Layoffs.
But when you are CEO you can inform the board of this magic money source called offering, where you can keep bloated headcounts and not lose profits. I'm sure they will listen to you.