Tesla CEO Elon Musk recently voiced his opinions on CEO compensation, specifically targeting Lucid CEO Peter Rawlinson, who also happens to be a former Tesla employee.
Rawlinson recently emerged at the top of Automotive News’ list of the highest-paid auto maker CEOs for 2022. While this may not come as a surprise, considering that executive compensation is already publicly disclosed, Musk’s tweet highlighted the importance of linking leadership compensation to performance.
Although no comment was obtained from Lucid regarding Musk’s tweet, it is worth mentioning that the survey mentioned a staggering $379 million figure for Rawlinson’s compensation. Rawlinson, who previously served as the chief engineer of Tesla’s first production vehicle, the Model S sedan, reportedly received around $600,000 in cash and equivalents for the year 2022, according to Lucid’s proxy reports. However, it is essential to note that the survey’s methodology takes into account the realized pay, which includes the value of vested stock and exercised options throughout the year instead of the value of equity granted in the same period.
It seems that the discrepancy between the reported figures is mainly due to differences in timing and methodology. The proxy statements from Lucid indicate that Rawlinson earned approximately $567 million over the past three years, with an average of around $189 million annually. This substantial sum is primarily attributed to a stock-related award worth a staggering $566 million in 2021. Within that year, Rawlinson received approximately 14 million restricted stock units that vest over four years and an additional 16 million units tied to achieving market capitalization milestones.
In 2022, four out of the five tranches related to market capitalization milestones vested, allowing Rawlinson access to approximately 16 million shares. At Lucid’s current stock price of approximately $6.20 per share, this amounts to a value of approximately $101 million. Notably, a year ago, when these units were awarded, their value stood at about $238 million.
It is also relevant to mention that Rawlinson’s base salary is relatively modest, amounting to $575,000 per year. To put things into perspective, General Motors (GM) CEO Mary Barra earned a base salary of $2.1 million in 2022.
While Rawlinson’s position at the top of the list raises eyebrows, Musk’s tweet serves as a reminder that aligning executive compensation with performance is a critical aspect of corporate governance.
Executive Compensation in the Auto Industry
Base salary is often just the tip of the iceberg when it comes to executive compensation. Take, for example, General Motors CEO Mary Barra, who has been earning an average total compensation of around $26 million per year over the past three years. In comparison, Ford Motor CEO Jim Farley’s total annual compensation is approximately $19 million.
Interestingly, CEOs in the electric vehicle sector seem to fare even better. R.J. Scaringe, the CEO of Rivian Automotive, has been raking in an impressive average total compensation of about $141 million per year for the past three years. The majority of Scaringe’s earnings are linked to stock-related awards totaling $421 million.
But perhaps the king of executive compensation is none other than Elon Musk. Over the course of three years, Musk has amassed a jaw-dropping $734 million in total compensation, equivalent to an average of $245 million per year. These massive earnings can be attributed to milestones achieved from a substantial stock award granted to him in 2018, which provided him with options worth an astonishing $70 billion.
However, before critics start pointing fingers at Musk, it’s crucial to acknowledge his impressive track record. Tesla’s stock has surged over 1,300% in the past five years, soaring from under $18 to approximately $250. Moreover, the company’s sales reached about $21 billion in 2018, with forecasts predicting sales of $100 billion by 2023.
Musk has also addressed recent controversies surrounding his compensation. There has been speculation about undisclosed compensation related to a glass house under investigation by the Justice Department. In response, Musk took to Twitter on September 1st to clarify that no glass house exists, stating, “Just want to reiterate that there is no glass house (metaphors don’t count lol) built, under construction, or planned! I’m not building any house of any kind anywhere. Period.”
While Musk continues to dominate the headlines, another electric vehicle manufacturer, Lucid Motors, has been experiencing a downturn. Its stock has plummeted by approximately 57% in the last year, which stands in stark contrast to the S&P 500 and Nasdaq Composite, both of which have seen gains of around 15% and 22%, respectively. The decrease in sales growth has significantly impacted investor sentiment towards Lucid Motors.
In conclusion, executive compensation in the auto industry is far more than just a simple base salary. CEOs like Barra, Farley, Scaringe, and Musk have earned substantial sums through a combination of salary, stock-related awards, and company performance. As the industry continues to evolve, it will be fascinating to witness how executive compensation further adapts and reflects the dynamic nature of the sector.