Elon Musk currently holds the title of the highest-paid CEO globally and is recognized as the richest individual on the planet. This status prompted Tesla’s board to propose an astonishing compensation package that has the potential to more than triple his net worth, positioning him to become the world’s first trillionaire.
At present, the 423.7 million additional shares of Tesla that Musk could claim are valued at approximately $148.7 billion. Should he achieve 12 exceptionally ambitious objectives over the next ten years, including boosting Tesla’s market value to an impressive $8.5 trillion, those shares will be awarded to him, potentially reaching a staggering worth of nearly $1 trillion.
This $1 trillion compensation scheme appears to be somewhat theatrical, and Tesla investors, including myself, will have the opportunity to vote on its approval come November. Its uniqueness lies not only in its substantial amount but also in the perception that it reflects a scenario where a CEO is essentially holding his own company as a bargaining chip.
Typically, the CEO of an automotive company facing a year marked by dismal sales figures—as a result of his political actions that seem intentionally aimed at alienating significant portions of his consumer base—would not be in line for a substantial reward. However, during negotiations with the board, Musk threatened to “pursue other interests” if his demands for an unprecedented pay package were not fulfilled.
For the majority of us, stating, “Compensate me more than anyone has ever received or I will continue performing poorly in my role,” would not be considered a wise negotiation strategy. Yet, it’s crucial to recognize that the Tesla board finds itself in a challenging predicament. Despite his often controversial behavior, Musk has accomplished near-miraculous feats with Tesla and his other ventures in the past. Ensuring he remains engaged with Tesla might be the best way to prevent him from delving deeper into the realms of politics and social media. This, of course, raises the question of what he would do with an additional $1 trillion a decade from now if he successfully manages to achieve another extraordinary goal.
This entire situation presents a complex moral dilemma, not just for Tesla’s shareholders, its board, or even Musk himself. A corporation’s primary responsibility is to generate profit (ideally in a somewhat ethical manner), and billionaires are unlikely to self-regulate. Therefore, I attribute the ongoing situation that enables Musk and his counterparts to maintain significant power directly to the American electorate.
While I run the risk of engaging in my own mythmaking, I must assert that I do not oppose capitalism. My journey from working on the floor of a meatpacking plant to building a portfolio that offers me considerable financial security reflects the system’s potential. I would certainly appreciate seeing the value of my own Tesla shares increase eightfold. This, in essence, was the aim of modern capitalism following the dismantling of Victorian-era monopolies and the regulation of financial markets in the early 20th century: to provide everyday individuals with secure avenues for saving and investing wisely, eventually granting them the freedom that comes from participating in well-regulated financial markets.
Hypothetically, this is why the capital gains tax rate is lower than all but the most minimal marginal tax rates imposed on income earned through labor. The rationale was that individuals had already been taxed on their income when it was earned, so they should receive a tax incentive on the returns derived from investing that income.
Instead of realizing a Utopian vision that elevates the average individual, we’ve witnessed a generation of CEOs restructuring their compensation to exploit every conceivable tax loophole known to the most astute tax lawyers in America. We have also seen several generations of Americans intentionally kept in the dark regarding the workings of financial markets. Did any of your educators ever mention, even once, what an IRA is or how a stock market index fund operates? Additionally, we have observed significant financial contributions flooding into politics, facilitated by a compliant Supreme Court, effectively spreading misinformation to keep the populace uninformed, while career politicians focus on fundraising rather than advocating for their constituents.
During most of the 1950s, the top marginal tax rate was an astounding 91%, applying only to the portion of an individual’s income exceeding the equivalent of roughly $2 million in today’s terms. While it is essential to return to higher income tax rates for the highest earners, what is truly necessary is to impose taxes on wealth itself and close the substantial loopholes that allow the ultra-wealthy to maintain a lower overall tax burden, percentage-wise, than that of a grocery store clerk.
This predicament is our collective responsibility. It falls on each of us. If you desire politicians—regardless of their political affiliations—to curtail the influence of individuals like Musk, it is imperative for you to actively demand it.
A decade is a significant duration. We have the opportunity to tax the wealthy. We can impose taxes on wealth. We can reduce our national debt. If Musk is on track to receive a $1 trillion payday ten years from now, and we, the U.S. taxpayers, fail to capture even a quarter, a third, or half of that, then we have collectively failed yet again.
Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, contributed to various publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are likely of significant value, yet they remain his own and should not be attributed to any organization with which he is associated. He would prefer not to share the credit, anyway. He can be reached at jon_wolf@hotmail.com.
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