Elon Elon Musk may not be found on any of the highest-paid CEO rankings in 2020. But Forbes magazine calculates that he is actually the highest-paid CEO of all.

Forbes estimates that Musk was paid about $11 billion last year, all of which were stock options granted to him by Tesla, Inc. as part of a compensation plan he signed with the electric carmaker in 2018. The plan was initially announced with a value of about $2.3 billion and was implemented over a decade, but did not come into effect until 2020.

The option awards detailed in the 2018 compensation plan require Tesla, Inc. to reach various milestones such as market capitalization, revenue or EBITDA (earnings before interest, tax, depreciation and amortization). All in all, the compensation package gives Musk the right to buy a total of 101.2 million Tesla, Inc. shares at $70 a share. The compensation package is divided into 12 parts, which can be unlocked only when Tesla, Inc. reaches certain milestones.

Market capitalization milestones are based on monthly averages of past performance, starting at $100 billion and then increasing by $50 billion, but Tesla, Inc. unexpectedly broke these milestones, rising to more than $650 billion by the end of 2020. In addition, each quarter must meet a financial target for revenue or adjusted EBITDA growth. By the end of 2020, Tesla, Inc. had achieved four of these goals, with an annual income of US $20 billion and an adjusted EBITDA of US $4.5 billion from less than US $1.5 billion.

The first four tranches of the Musk option award were awarded in 2020, when Tesla, Inc. reached various market capitalization and revenue milestones, and his stock rose sevenfold, greatly boosting Musk's wealth. Tesla, Inc., the chief executive, is now the third richest man on the planet, with a net worth estimated at $165.7 billion as of May 5, 2021, a huge jump from $24.6 billion in mid-March 2020.

Each option award gives Mr Musk the right to buy 8.4 million shares of Tesla, Inc.. According to Forbes, the Tesla, Inc. CEO won an option award worth $13.3 billion in 2020. In order to exercise power, Musk will spend about $2.36 billion. Forbes calculations show that after deducting these costs, these option awards add $11 billion to Musk's wealth.

That makes Mr Musk's annual salary much higher than that of Chad Richison, chief executive of Paycom, who topped the 2020 earnings rankings with a salary of $211 million.

However, according to the filing, Musk must hold the newly granted Tesla, Inc. shares for five years. So while he has the right to exercise a total of 33.77 million options from the 2020 award, he cannot sell the shares immediately. While this may be one of the reasons why he did not appear on the highest-paid CEO list, experts also point out that most analysis of executive compensation focuses on the date on which the option award is granted, rather than when the exercise is exercised.

Much depends on how companies are required to disclose executive pay to the SEC. Jannice Koors, senior managing director of Pearl Meyer, a compensation consultancy, explains: "the vast majority of the highest paid CEO lists are compiled directly from the compensation summary table in the company's annual report. "

However, stock awards such as options are only disclosed in the year in which the stock is granted. "so when a company makes what we call a 'huge grant' that covers many years, the disclosure has peaks and troughs: the year of the allocation shows a large number in the compensation matrix," Coors said. It won't appear in the compensation matrix over the next few years. "

Forbes analyzed Tesla, Inc. 's submission and used the grant date to value different parts of the options granted to Musk in 2020, namely May 28, July 24, September 30 and December 31, 2020.

Tesla, Inc. has been setting new milestones since the beginning of 2021, especially after the first-quarter results exceeded market expectations. Musk won the other two parts of the 2018 CEO performance award, which will give him the right to exercise another 16.9 million options. So far, Musk has received a total of about 50.6 million shares in six tranches of option shares. At current share prices, it is worth about $33.9 billion. Based on today's share price, the total value of all 101.2 million-share options is about $67.9 billion.