Business
What happens when CEO pay becomes all or nothing
Could staking your compensation on an all-or-nothing bet make you a better leader—or just a higher-stakes gambler? That question is resurfacing in boardrooms as “moonshot” pay packages gain traction among CEOs and boards seeking to inspire extraordinary performance and lock in ambitious talent, writes my colleague Amanda Gerut.
The concept, first thrust into the spotlight by Elon Musk’s 2018 Tesla deal, has reemerged in striking fashion through Rick Smith, CEO of Axon Enterprise, the maker of Taser stun guns and police body cameras. In 2018, Smith accepted an unconventional offer: no bonuses, no meaningful salary (just $31,000 a year), and no equity unless he could grow Axon’s market cap tenfold over the next decade. Each $1 billion increase unlocked a tranche of stock, with the ultimate goal of lifting the company’s value from $2.5 billion to $13.5 billion.
It was a daring bet, but one that paid off. Within five years, Smith doubled Axon’s value to over $13 billion and became the highest-paid CEO in America with $165 million in compensation. The stock surged more than 600%.
Moonshot packages invert the standard logic of executive pay. Instead of the usual mix of salary, annual bonuses, and performance shares, they tie virtually all potential compensation to long-term milestones, often at seemingly impossible levels. Advocates argue that they strengthen alignment with shareholders, encourage long-term thinking, and inject urgency into the transformation process. Smith even extended a version of his plan to Axon employees, allowing them to trade portions of their pay for stock that vested alongside his. But the approach is not without controversy. The plans are highly volatile, difficult to calibrate, and often unpopular with investors wary of oversized payouts or asymmetric risk. Miss the mark, and the CEO gets nothing. Hit it too quickly, and shareholders may accuse boards of overpaying.
Still, the model is spreading because, the rationale goes, extraordinary results demand extraordinary incentives, and in a market obsessed with innovation and valuation multiples, big bets may be the price of attracting and retaining elite talent.
Whether these moonshots create enduring value or prove to be flashes of fortune remains an open question. What’s clear is that they represent a new frontier in corporate risk-taking—one that fuses pay, purpose, and performance into a single, high-stakes wager on leadership itself.
Ruth Umoh
ruth.umoh@fortune.com
Smarter in seconds
Brand revival. Inside Ralph Lauren’s luxe reset—and the CEO who made it stick
Checkmate. How this gaming founder went from being child prodigy in a religious cult to building a chess empire
AI advantage. MasterClass founder says he’s saved an entire day of work thanks to a custom GPT
BOGO. These co-CEOs swear by splitting the job: ‘The demands on a modern CEO are close to unsustainable’
Leadership lesson
AlixPartners co-CEO Rob Hornby on splitting the corner office role: “We share responsibility for all outcomes for everything. But that doesn’t mean that we are equally involved in everything—because we have different expertise.”
News to know
A coalition of healthcare providers, religious groups, and university professors has filed the first lawsuit challenging Trump’s new $100,000 H-1B visa fee. Fortune
The CEO of Land O’Lakes is breaking ranks with corporate America by warning that mass deportations could cripple U.S. farms. Fortune
Washington is showing little urgency to resolve the government shutdown, an impasse driven by both parties’ belief they hold the upper hand. NYT
North Korean spies posing as remote IT workers used AI-generated IDs to steal up to $1 billion for Kim Jong Un’s nuclear program. Fortune
With the job market weakening and inflation still high, Trump’s advisers are urging him to emphasize forecasts of a rebound early next year once his tax-and-spending plans take effect. Fortune
Israel and Hamas will begin mediated talks in Egypt on Monday to negotiate an end to their two-year conflict. Bloomberg
