A really smart one. Or one of middling intelligence. Or anyone who understands how options are valued. Or anyone who has access to an accountant who can do a Black-Scholes calculation or set up a monte carlo simulation of the expected payout of that deal. Yes, receiving compensation in that form is riskier than being paid cash (obviously). But even accounting for that, he got paid more than any CEO has ever been paid ever. As noted by Matt Levine over at Bloomberg:
But the options weren’t worth zero , as an economic matter: There was some probability that Tesla would grow and he’d get to exercise the options and make $55.8 billion, or more, or less. Finance has reasonably well-understood ways to put a single current numerical value on this uncertain distribution of potential future values. Tesla determined that the options were worth about $2.3 billion at the time Musk got them: There was some chance they’d end up worthless, some chance they’d end up worth $55.8 billion, some chance they’d end up worth $100 billion or $40 billion or any other nonnegative number, but, averaging over all those possibilities, the expected value was $2.3 billion.
After all, Tesla’s market cap on the date of the grant was about $61 billion. It was not especially unlikely that Tesla’s market cap might hit $111 billion in a ten year period. Not guaranteed, of course - but hardly a longshot. That’s only a 6% CAGR, after all. It was actually really unlikely that Musk wouldn’t get anything of value. Successive tranches are riskier, of course - but the idea that this compensation package was basically Musk agreeing to work for nothing unless he hit a moonshot is incorrect.
The package was worth $2.3 billion the day he got it, even though it was at the money on the day of the grant. That’s what Tesla booked it as. $2.3 billion. That’s an absurd level of compensation for a CEO. I’d take that package in lieu of salary any day of the week and twice on Sunday, if I was as wealthy as Musk already was at that time. I bet there isn’t a CEO out there that wouldn’t take an options package worth $2.3 billion in lieu of their current compensation arrangement (assuming they already had enough money on hand to cover their lifestyle until the options vested). It’s an absurdly generous package. Tesla gave Musk such an unbelievably high amount of future contingent value that the package was worth an absurd amount of money the day it was granted.
As noted repeatedly by the court, there’s nothing inherently improper about granting a CEO an absurdly high level of compensation - but to do that, you have to either reach that absurd level of compensation through a negotiation with an independent company representative(s) or have it ratified after a fully informed shareholder vote. Neither occurred.