Here’s yet another low point in Elon Musk-dom, as reported by CNN:

• Tesla shareholders approved a pay package on Thursday that could make CEO Elon Musk, already the world’s richest person, the world’s first trillionaire.
• Tesla announced that more than 75% of shares voted in favor of the pay package during the company’s annual shareholder meeting. The vote didn’t include the 15% of the company that Musk already owns.
• The crowd at the meeting broke into cheers and chants when the results were announced. Musk thanked the shareholders and the Tesla board soon after. “I super appreciate it,” he said.
• Musk doesn’t take any salary, but the approved pay package comes in the form of a stock grant that would give him as much as 423.7 million additional Tesla shares over the next 10 years.
• Those shares could be worth about $1 trillion, assuming the company reaches the $8.5 trillion market cap needed to have Musk qualify for the full potential payout. In addition, Tesla needs to achieve a series of either operational or financial targets for him to get the full number of shares, which would be distributed in 12 equal blocks.
• Getting all the shares available under this package over the next 10 years would be the equivalent of earning $275 million a day, dwarfing any other executive pay package in history.

Given the Tesla board’s demonstrated spinelessness, one expects the targets will be partly or wholly waived when Musk (as he will) fails to achieve them. But even if that’s not the case, the award represents a comprehensive failure of corporate governance and rationality, stretching the already strained philosophy of “pay for performance” into a surreally depraved knot. This is from a New York Times article titled Would Elon Musk Work Harder for $1 Trillion Than $1 Billion?

• The assumption that human beings are most forcefully motivated by money is a fundamental axiom of economics that is baked into most policy and business decisions. It anchors arguments for ever-rising executive compensation, lower capital gains taxes, work requirements for Medicaid recipients and so much more.
• But research from economists and psychologists has presented a much more complicated picture of how monetary — and other — rewards affect effort.
• …There is scarce proof that the companies led by the highest-paid chief executives have the best long-term stock performance. One recent study looked at the 10 most valuable firms on the Nasdaq stock exchange between 2017 and 2022, a period that included the Covid-19 pandemic. It concluded that paying chief executives significantly more than the company president, other top executives or average employees did not increase a firm’s profitability.
• Another study that looked at 429 large American firms over a decade found that total shareholder returns in companies where chief-executive pay was below the median for their sector did better than companies where pay exceeded it.
• High compensation can sometimes lead to overconfidence that results in bad decisions. Some psychologists have found that high-stakes pressure can increase people’s tendency to choke.
• … Dan Ariely, a behavioral economist at Duke University, suggested a thought experiment: “Imagine a day in the life of Elon Musk, where he gets $1 trillion versus $1 billion. He wakes up and he does what differently? He drinks more coffee, he sleeps less, he sleeps more, he exercises less, he talks to people, he thinks harder. What exactly would he do?”
• “At this level, I don’t see any way for them to do anything differently,” Mr. Ariely said of using additional financial incentives to get the ultrarich to work harder.

As I’ve written before, much of IFRS 2 is based on a corresponding, dubiously programmatic view of human behaviour, for instance in distinguishing between conditions (so-called vesting conditions) that will in theory affect the economic resources to be received, for example by incentivizing the recipients to work harder or better, and those (non-vesting conditions) that are beyond the control of the recipients, so they’ll put in the same amount and quality of work either way. The reasoning may just about hold together at lower income levels, but as indicated above, breaks down completely at the highest echelons.

And even if it doesn’t, the notion of bestowing such wealth upon one such unstable person ought to provoke chills rather than cheers. Such a level of wealth clearly can’t make Musk’s life more comfortable or stable; it can only give him more power to shape the world. And one should never forget Musk’s numerous demonstrations of cruelty and contempt, exemplified by how he said of the U.S. Agency for International Development that “We spent the weekend feeding USAID into the wood chipper,” thus summarily withdrawing (or at best muddying) funding which saved several million lives a year. The Tesla compensation vote coincided in the news with the Trump administration’s fight against funding food stamps, affecting some 42 million low-income Americans; of course, it’s not the Tesla board’s job to solve that problem, but if the wrongness of Musk’s compensation proposal wasn’t clear enough on its own terms, then even a vague notion of “greater good” should have helped them out. If only because an America and a world shaped according to the ideology and instincts of Elon Musk is one in which the over-hyped economic prospects for Tesla’s products can only shrink…

The opinions expressed are solely those of the author.