What happens when CEO pay becomes all or nothing

Concept, first pushed into the spotlight Tesla deal 2018 from Elon MuskThey have returned in an amazing way through Rick Smith, CEO of the company Axon EnterpriseSand -made guns and police cameras. In 2018, Smith accepted an unconventional offer: there are no rewards, nor a meaningful salary ($ 31,000 per year), and there are no ownership rights unless he can cultivate the maximum AXON market over the next decade. Every billion dollars stopped a slice of shares, with the ultimate goal of raising the company’s value from 2.5 billion dollars to 13.5 billion dollars.

It was a bold bet, but it was guess. Within five years, Smith doubled the value of a nervous axis for more than 13 billion dollars and became the highest CEO of America with compensation for $ 165 million. The stock increased more than 600 %.

Moonshot packages fluctuate the standard logic of the executive payment. Instead of the usual mixture of salary, annual bonuses, and performance shares, they link almost all possible compensation to long -term features, and often apparently impossible levels. Defenders argue that they are strengthening compatibility with shareholders, encouraging long -term thinking, and pumping huge salt into the transformation process. Smith even expanded a copy of his plan for a nervous axis, which allowed them to operate parts of their salaries in exchange for the shares assigned next to him. But the approach is not without controversy. These plans are very volatile, difficult to calibrate, and are often unpopular with caution of huge payments or asymmetric risks. Miss Miss, and the CEO does not get anything. It hit it very quickly, and the shareholders may accuse excessive payment panels.

However, the model is spreading because, the logical basis goes, and the unusual results require unusual incentives, and in a market obsessed with complications of innovation and evaluation, large bets may be the price of attracting and preserving elite talents.

Whether these satellite shots create a permanent value or prove that they are flashes of wealth remain an open issue. What is clear is that it represents new boundaries in the risks of companies-one destroys the wage, purpose and performance of the single bet on the same driving.

Ruth Omoh
Rnt.umoh@fortune.com

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