While Tesla is coming closer to the announcement of its Q2 earnings results, Elon Musk is approaching his another big payout day.

Tesla Inc (NASDAQ: TSLA) CEO Elon Musk stands to receive a second set of stock options worth $2.1 billion. It comes as Tesla has consistently had a market capitalization of $150 billion in the last six months. This makes Elon Musk (should the board approve) eligible for the second of a series of 12 payouts in stock options.

Yesterday, Tesla (TSLA) stock price was $1,568.36 (-4.54%), while today in the pre-market, it is 1.32% up, at $1,588.99. Tesla stock price hit this key target just before the announcement of Q2 results that are expected to come out today.

Elon Musk is not paid a salary by Tesla. In 2018, Tesla (TSLA) shareholders approved a pay package based on the achievements.

Elon Musk Will Soon Get New Award in Stock Options

The pay package is made up of 20.3 million stock options. The payout of the stock options has 12 tranches. the tranches are paid out based on milestones. If a milestone is achieved, the Tesla board must approve his pay package.

Elon Musk is eligible to buy Tesla (TSLA) stock at a $350.02 discount. He can sell the stock at a net difference. The issue here is that he has a five-year window to do this. Going by the numbers, Elon Musk is in line to receive options worth about $2.1 billion.

The Tesla board approved the first tranche of compensation in May. It happened after Tesla’s (TSLA) stock market capitalization was over $100 billion for six months. As it stands, Elon Musk is eligible to receive $4.2 billion worth of stock.

Such a strategy of getting payments keeps the CEO focused on achieving the goals that he said he would. The company moves in one direction. It also allows for stock prices to grow due to results. Once the CEO gets the job done, he or she gets compensated.

Drawbacks in Performance-based Compensation

This approach also has its drawbacks. CEOs may focus only on achieving such goals as opposed to moving the company forward in all aspects. Many are worried that this is what is happening to Tesla. The argument is that TSLA stock prices are too high.

Critics think that Tesla is yet to deliver the kind of value that warrants such a rise in stock prices. They compare Tesla (TSLA) to other market leaders and point to a near-zero movement in prices. The principle behind this is that such companies were delivering results before their stocks went up. They think that Tesla (TSLA) stock prices are driven by the popularity of its CEO.

It is uncertain. Tesla is globally a clear leader in its field. Its technology is second to none. Its innovation curve is so high that many automakers can’t compete.

Then there is also brand loyalty.

At the end of the day, Tesla may become one of those companies that keep growing due to innovation. And a superstar CEO!

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Christopher Hamman

Christopher Haruna Hamman is a Freelance content developer, Crypto-Enthusiast and tech-savvy individual. He is also a Superstar Content Developer, Strategy Demigod, and Standup Guy.

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