• Elon Musk, Tesla’s CEO, received $0 in compensation last year amid a legal battle over a 2018 stock award.

• Tesla’s board is considering a new compensation package for Musk, exploring options like performance-based pay.

• Approaches range from incentivizing involvement to matching standard CEO pay, or mirroring Axon’s employeewide plan.

Elon Musk was the lowest-paid chief executive of an S&P 500 company last year. Tesla paid him $0.

It has been that way for several years amid a legal battle over a monster stock award in 2018. A court has twice thrown out Musk’s pay package—calling the process of creating it flawed despite two votes of support from shareholders. 

Now Tesla’s business is struggling, Musk is fresh off his detour through U.S. politics, and the Tesla board is exploring a new compensation package for its longtime leader. It must answer a thorny question: How do you pay the world’s richest man?

Pay for founder-CEOs varies widely: Taser maker Axon gave Rick Smith a $165 million stock award last year, making him the highest paid CEO in The Wall Street Journal’s annual ranking. Meta paid Mark Zuckerberg, its billionaire co-founder, $27 million last year, mostly for personal-security services. Michael Dell got $3.1 million, mostly cash, while Berkshire Hathaway’s Warren Buffett famously collects a modest salary and security benefits ($405,111) and gets no stock grants.

Even for other individuals in lofty positions, pay can vary wildly: President Trump makes $400,000 a year (plus a $50,000 tax-free expense allowance). The president of Harvard gets more than $1 million. Baseball’s Juan Soto could make as much as $800 million over 15 years under his late-2024 contract with the New York Mets. 

Tesla didn’t respond to requests for comment. Here are three approaches to paying Musk:

Option 1: Make him show up and go big

Tesla’s board should make it clear to Musk that he has to show up and do the job—and be serious about planning for an eventual replacement, said Alan Johnson, managing director of Johnson Associates, a pay-consulting firm.

That could mean he has less time to spend on SpaceX, government work and his other ventures.

“Why should Tesla have to pay for that? It’s making some requirements about him being involved, having some succession—and starting to run it like a real company,” Johnson said. “If you stay and create value, you’ll make an awful lot of money. But if you don’t want to be involved or you don’t create value, you won’t.”

Elon Musk, boarding Air Force One, has pledged to refocus on Tesla after his detour through politics.

That done, the board should think big—Musk is clearly motivated by the potential to reap billions of dollars in Tesla shares, Johnson added. 

“There’s no point in putting out millions when for him that would be irrelevant,” Johnson said. “It would be a lot of billions.”

Tesla should also keep the structure of Musk’s pay simpler, Johnson said. His 2018 option grant was too intricate, with a dozen tranches and even more discrete market and operating targets. 

This time, he recommends eliminating the complexity and paying for stock-price performance that beats the market, or even matches it, given that Tesla may no longer be the red-hot growth engine it once was.

“The value today is enormous, and I think that has to be recognized—so maintaining or growing it relative to the market should be worth an awful lot of money,” Johnson said. “It’s about value creation. It’s not about how many cars you’re going to sell.”

Elon Musk at the opening of a Tesla factory in Germany in 2022.

Option 2: Pay him like a CEO

Others argue it isn’t the board’s job to satisfy Musk’s demands for a bigger ownership stake in the automaker. The CEO has openly discussed devoting his attention elsewhere if he can’t own a quarter of Tesla—he controls about 20% now. Musk says that would give him a freer hand. 

“You’re paying the person to do an executive job, and you have to separate that from what kind of equity stake they have,” said Robin Ferracone, founder and CEO of pay-consultancy Farient Advisors. “If he wants a bigger stake in the company, go buy it.”

The board could establish a co-investment arrangement, under which Tesla matches some level of shares Musk acquires—if he stays for several years, Ferracone said. “Investors like that better than just giving away restricted stock, for example.”

Ferracone wasn’t a fan of the size of Musk’s 2018 option grant, but said its design had merit, rewarding him for incremental stock-price appreciation if it was accompanied by financial gains. 

Most in the pay industry argue Tesla’s board should follow the same process boards should to set pay for any other CEO: Identify a constellation of broadly similar executives—including founders of big tech companies and CEOs at automakers and artificial-intelligence companies, for example—and use those to establish a dollar amount that makes sense.

Pay for Elon Musk, at far right, could be determined by comparing it to that of his contemporaries such as, from far left, Meta CEO Mark Zuckerberg, Amazon.com founder Jeff Bezos and Alphabet CEO Sundar Pichai, who attended the inauguration of President Trump.

“The decision-making process for a compensation committee, in our opinion, should not be different for founder pay and non-founder pay,” said Scott Oberstaedt, senior director for executive compensation at Willis Towers Watson, speaking generally. 

Option 3: Pay him like everyone else

The top-paid CEO of 2024—Axon’s Smith—said his own $165 million pay package last year was structured under a plan open to the company’s roughly 4,000 employees. He describes it as an outgrowth of his prior pay package, which in turn was inspired by Musk’s 2018 grant.

The 2024 package is tied to a series of targets combining share price and financial measures, with restrictions preventing shares from vesting too quickly. Axon employees can forgo a chunk of income over seven years, using it to bet on the company’s performance. Those making less than $90,000 a year receive grants outright.

“I’m on the same mathematical plan as everyone else,” Smith said. “I would love to see other companies copy that.”

If Axon matches typical S&P 500 growth, the CEO and other employees get shares initially valued at about what they set aside, Smith said. Stronger performance could triple their shares. Lagging performance means less—and potentially nothing. 

So far, Smith calls it a success, in part because it gives Axon a way to compete with startups offering shares and the potential for big stock gains.

“Most who could, took a large chunk of pay and deferred,” Smith said. “We are seeing the benefits of everyone being aligned to the same metrics.”