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More CEOs want Elon Musk–style ‘moonshot’ pay packages—but comp experts are raising alarms

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2 months ago

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The all-or-nothing moonshot pay plan was a gambit so risky even Axon Enterprise CEO Rick Smith’s wife was against it. 

But Smith had started getting antsy around 2016, as he was approaching three decades at the company, Axon compensation committee chair Hadi Partovi told Fortune. Smith was talking more seriously to the board about his succession plan, who was next to lead the company, and what he would do next. Partovi knew Smith could make a lot more money if he launched a startup than if he made Axon worth 10 times as much under his previous comp plan. 

“This is when I realized we had a real problem,” said Partovi. 

Smith thrives in high-risk, high-reward environments, so the Axon board granted Smith a near carbon copy of Tesla CEO Elon Musk’s moonshot pay plan but on a much smaller scale. The challenge to Smith was to grow the Taser stun gun and body-camera maker 10-fold over a 10-year performance period starting in 2018. From a base of $2.5 billion, Smith had to increase the company’s market cap by $1 billion to unlock each new tranche of stock options, for a total of 12 tranches and a market cap of $13.5 billion. In addition, Smith had to hit eight revenue-based operational or eight adjusted-Ebitda-based goals. During the decade he was supposed to work on achieving those goals, he would get almost nothing—no bonuses or other incentives, and his salary was about $31,000 a year.

“In full candor, my wife was against me taking on the challenge, as she saw it as just too risky,” Smith wrote in a letter to investors in 2023. But Smith blew through all the goals and each of the 12 tranches in five years—half the time the board gave him—making Smith the highest-paid CEO last year with compensation valued at $165 million. The stock price grew more than 600% between 2018 when the board offered him the moonshot and 2023. After he unlocked the 12th tranche, Smith negotiated an $88 million reduction on his next performance plan (which will keep him at Axon until at least 2030 with a goal of driving the stock to $943.75) and directed it be granted to the lowest-paid workers at Axon, showering them with surprise stock grants based on their years of tenure at the company.

“The best is yet to come,” Smith wrote to investors in his letter this year. 

What is a moonshot pay package?

Smith shooting the moon—twice, potentially—represents a resurgent breed of executive compensation that has captured the imaginations of a growing number of CEOs. Moonshot wanderlust initially kicked into high gear after Elon Musk’s groundbreaking 2017 award from Tesla, once valued as high as $56 billion before it was twice rescinded owing to a legal challenge. Moonshot grants, not to be confused with an outsize stock grant known as a “mega grant” for its sheer size, tie CEO compensation almost entirely to aggressive, seemingly impossible performance targets, explained Eric Hoffmann, vice president and chief data officer at comp consulting firm Farient Advisors. CEOs don’t get the awards unless they hit specific valuation hurdles and operational goals, he said, and the performance periods are typically five, seven or 10 years, rather than the more standard three-year period.

“It should be difficult to get these awards,” said Hoffmann. “You have to create a lot of value in order to earn these kinds of awards.”

Traditional CEO pay packages include a base salary, an annual cash bonus, and a longer-term equity incentive award often based on time and performance goals. According to compensation data firm Equilar, median compensation among S&P 500 CEOs was $17.1 million in 2024, up nearly 10% over the year prior. Moonshot awards, however, upend the traditional compensation model while also bucking the trend of billionaire tech founders like Amazon’s Jeff Bezos, Google’s Larry Page, and Meta’s Mark Zuckerberg, who all held large equity stakes and focused on making them more valuable, noted Hoffmann. The key distinction is that those founders built wealth by focusing on increasing the value of their existing equity stakes, while taking minimal or no compensation, rather than seeking massive equity grants on top of their founder stakes, said Hoffmann. The moonshot model is a departure—seeking both founder equity upside plus additional compensation awards.

“This way of wealth building is different than what was used during the dotcom era,” he noted.

The upside to the moonshot is an enormous payout and a growing slice of company ownership if an executive can deliver transformational growth, but investors aren’t always wild about them, and moonshots don’t come without significant risk, said Todd Sirras, a managing director with consulting firm Semler Brossy who has advised clients on these deals. Companies are “willing to bet all of these ungodly amounts of money on one person thinking, ‘That’s the right machine we need for the factory,’” said Sirras. But there’s a fundamental flaw in this approach because people are unpredictable—unlike factory equipment.

“Human beings are terrible machines,” Sirras told Fortune. “They’re emotional. Their attention gets divided thinking about what airplane they’re going to buy. It’s more risky to invest in a human being than it is to invest in a machine because human beings break in different and unpredictable ways.”

Until now, the moonshot offers have been almost exclusive to founder-CEOs and almost always established pre-IPO, said Sirras. Semler Brossy’s database of about 80 moonshot awards includes dozens issued during the SPAC IPO boom of 2020 and 2021 that are now “dead in the water” because companies failed to meet their valuation targets, he added. 

With fewer IPOs in recent years and fewer moonshots, there are about 16 that exist among large publicly traded companies—and even fewer CEOs who have achieved maximum payouts, including Smith and Musk, according to research from Claire Kamas, a senior data analyst at Farient Advisors. Other companies that have awarded the grants include Airbnb, DoorDash, Oracle, ServiceNow, and RH, formerly known as Restoration Hardware, Kamas found. But the high-profile nature of the awards and the eye-popping figures associated with them are pushing board-level compensation committees that negotiate CEO pay to prepare for conversations about similar packages. 

Farient has gotten queries from compensation committee chairs who are already preparing for how they will address the situation when the CEO comes to them about a moonshot plan. In one case, the CEO isn’t a founder but a manager hired to run the company, Hoffmann noted. He isn’t a fan of moonshot awards, particularly in cases where CEOs already hold significant ownership stakes and control over their companies. 

“From a firm perspective, it is our view that these plans are generally not in the best interests of the organizations, the stakeholders, and shareholders in these companies,” said Hoffmann. “To me, a lot of these feel like a lottery ticket, a winner-take-all.”

Despite the risk, Sirras sees these awards rising in popularity again, and he sees new trends emerging: Founders are granting moonshots to their “anointed successors,” he said. Real estate platform Opendoor Technologies this month granted a moonshot potentially worth $2.8 billion and an 11% slice of the company to new CEO Kaz Nejatian. Sirras said that award looks to be the first of its kind, and the board likely offered it to Nejatian because of a blessing from Opendoor’s cofounders, Eric Wu and Khosla Ventures’ Keith Rabois. Wu and Rabois returned to the board alongside Nejatian’s hiring and invested $40 million of equity capital into the company. 

Sirras said the same trend seems to be occurring in private equity. For instance, when founders Henry Kravis and George Roberts of KKR stepped down, the firm in 2021 granted co-CEOs Joe Bae and Scott Nuttall 1.2 million shares of KKR Holdings, valued at about $75 million, as part of their promotions. That same year, Apollo Global Management granted copresidents Jim Zelter and Scott Kleinman the potential to earn more than $860 million in stock. Zelter was promoted to president in 2025, and Marc Rowan remains CEO.

In addition to controlling founders who are planning leadership transitions and “founder-anointed successors,” the new wave of awards will likely also go to leading-edge executives in scenarios in which founders are making investment decisions, said Sirras. The arms race for talent between OpenAI and Meta and the reported compensation packages Zuckerberg has offered come to mind, he added. 

“From a design perspective, the magnitude is mind-boggling,” said Sirras. He compared it to the Jurassic Park film series. “Danger increases exponentially the closer these awards get to the general executive population,” Sirras wrote in an email. Alongside moonshots for founder-anointed successors and non-successors with a major capital investment he deems “inside the T. rex fence,” the rise of “awards in non-founder companies means the dinosaurs have escaped and are heading to the mainland,” Sirras wrote. 

The awards can also prompt investors to revolt. Business payments company Corpay awarded CEO Ronald Clarke 850,000 performance-based stock options valued at $55.6 million in 2021. The award had stock price hurdles of $350 and $400 and Clarke got no long-term equity grants in 2020, 2022, and 2023. In 2024, the comp committee canceled 300,000 stock options subject to the $400 hurdle and modified the criterion for 550,000 stock options subject to the $350 hurdle to require that Corpay hit a closing stock price at or above $350 for at least three trading days by the end of 2024. Clarke achieved the modified hurdle on Oct. 23, 2024. Corpay told investors the change was meant to “align Mr. Clarke’s realized pay with that of shareholders who benefited from the increased stock level over $350 before the modification, but prior to the modification the stock had not closed above $350 for 10 consecutive days, which was the pre-modification hurdle.” In other words, the board made it simpler for Clarke to earn the stock options by reducing the target from 10 consecutive trading days above $350 to just three trading days, a hurdle he cleared shortly after the change. 

The stock didn’t hit $400 until February 2025 and is currently trading at just under $300. The company’s 2025 Say-on-Pay vote—a thumbs-up, thumbs-down nonbinding vote on executive pay—only got support from 53.5% of votes cast. Over the past 14 years, the Russell 3000 index saw average support of about 91% for pay programs. 

Corpay did not respond to a request for comment.

Axon Enterprise moonshot

At Axon, Smith’s moonshot deal differs from Musk’s in another key way: It’s open to Smith’s direct reports on down to line workers at Axon, making employees eligible for a version of Smith’s moonshot deal. Workers could give up some salary, put some of their pay at risk, and work to hit revenue targets. Plus, every employee in the U.S. got a grant of 60 performance stock units that vested according to the same milestones in Smith’s award—a move almost unheard of in corporate America. No one other than Smith was able to essentially give up all their pay, said Partovi, mostly because Smith was independently successful enough that if he didn’t cut it and got nothing, he had enough of a cushion. Roughly $75 million in employee compensation was locked up as at-risk pay so employees could take part in the moonshot. 

“I really think that was a driver behind why the company grew so fast,” said Partovi. “Any element of infighting was gone—everybody was suddenly like, ‘We’re all in this together.’”

Smith’s 2023 award went through a significant negotiation process where Partovi heard directly from shareholders about everything they didn’t like about the first plan so he could debug it. The board also attempted to legal-proof it against the type of challenge that Musk’s moonshot faced, prompting one of the compensation committee members who had socialized with Smith to resign from the committee. The board also changed the vehicle type from performance options to restricted stock, added in speed brakes that would keep Smith at Axon, and made it more difficult for Smith to hit the last few tranches. Partovi said he addressed every question from shareholders about misalignment in the plan during the board’s negotiation process with Smith. 

Ultimately, Partovi credits the moonshot deal with transforming the corporate culture around shared risk and high reward with a version of a high-stakes compensation plan rolled out to everyone at the company. In his view, it helped to eliminate dynamics where direct reports and general employees resent outsize pay for the chief executive, he said. 

“The big thing is, the CEO is taking a risk in giving up his pay, and you don’t want it to turn out to be shareholders win and the CEO wins or shareholders lose and the CEO still wins,” said Partovi. “I don’t know if grants like Rick’s make sense for everybody, but they strongly make sense for Rick Smith at Axon.”



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Senate Dems’ plan to fix Obamacare premiums adds nearly $300 billion to deficit, CRFB says

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December 5, 2025

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The Committee for a Responsible Federal Budget (CRFB) is a nonpartisan watchdog that regularly estimates how much the U.S. Congress is adding to the $38 trillion national debt.

With enhanced Affordable Care Act (ACA) subsidies due to expire within days, some Senate Democrats are scrambling to protect millions of Americans from getting the unpleasant holiday gift of spiking health insurance premiums. The CRFB says there’s just one problem with the plan: It’s not funded.

“With the national debt as large as the economy and interest payments costing $1 trillion annually, it is absurd to suggest adding hundreds of billions more to the debt,” CRFB President Maya MacGuineas wrote in a statement on Friday afternoon.

The proposal, backed by members of the Senate Democratic caucus, would fully extend the enhanced ACA subsidies for three years, from 2026 through 2028, with no additional income limits on who can qualify. Those subsidies, originally boosted during the pandemic and later renewed, were designed to lower premiums and prevent coverage losses for middle‑ and lower‑income households purchasing insurance on the ACA exchanges.

CRFB estimated that even this three‑year extension alone would add roughly $300 billion to federal deficits over the next decade, largely because the federal government would continue to shoulder a larger share of premium costs while enrollment and subsidy amounts remain elevated. If Congress ultimately moves to make the enhanced subsidies permanent—as many advocates have urged—the total cost could swell to nearly $550 billion in additional borrowing over the next decade.

Reversing recent guardrails

MacGuineas called the Senate bill “far worse than even a debt-financed extension” as it would roll back several “program integrity” measures that were enacted as part of a 2025 reconciliation law and were intended to tighten oversight of ACA subsidies. On top of that, it would be funded by borrowing even more. “This is a bad idea made worse,” MacGuineas added.

The watchdog group’s central critique is that the new Senate plan does not attempt to offset its costs through spending cuts or new revenue and, in their view, goes beyond a simple extension by expanding the underlying subsidy structure.

The legislation would permanently repeal restrictions that eliminated subsidies for certain groups enrolling during special enrollment periods and would scrap rules requiring full repayment of excess advance subsidies and stricter verification of eligibility and tax reconciliation. The bill would also nullify portions of a 2025 federal regulation that loosened limits on the actuarial value of exchange plans and altered how subsidies are calculated, effectively reshaping how generous plans can be and how federal support is determined. CRFB warned these reversals would increase costs further while weakening safeguards designed to reduce misuse and error in the subsidy system.

MacGuineas said that any subsidy extension should be paired with broader reforms to curb health spending and reduce overall borrowing. In her view, lawmakers are missing a chance to redesign ACA support in a way that lowers premiums while also improving the long‑term budget outlook.

The debate over ACA subsidies recently contributed to a government funding standoff, and CRFB argued that the new Senate bill reflects a political compromise that prioritizes short‑term relief over long‑term fiscal responsibility.

“After a pointless government shutdown over this issue, it is beyond disappointing that this is the preferred solution to such an important issue,” MacGuineas wrote.

The off-year elections cast the government shutdown and cost-of-living arguments in a different light. Democrats made stunning gains and almost flipped a deep-red district in Tennessee as politicians from the far left and center coalesced around “affordability.”

Senate Minority Leader Chuck Schumer is reportedly smelling blood in the water and doubling down on the theme heading into the pivotal midterm elections of 2026. President Donald Trump is scheduled to visit Pennsylvania soon to discuss pocketbook anxieties. But he is repeating predecessor Joe Biden’s habit of dismissing inflation, despite widespread evidence to the contrary.

“We fixed inflation, and we fixed almost everything,” Trump said in a Tuesday cabinet meeting, in which he also dismissed affordability as a “hoax” pushed by Democrats.​

Lawmakers on both sides of the aisle now face a politically fraught choice: allow premiums to jump sharply—including in swing states like Pennsylvania where ACA enrollees face double‑digit increases—or pass an expensive subsidy extension that would, as CRFB calculates, explode the deficit without addressing underlying health care costs.



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Netflix–Warner Bros. deal sets up $72 billion antitrust test

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December 5, 2025

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Netflix Inc. has won the heated takeover battle for Warner Bros. Discovery Inc. Now it must convince global antitrust regulators that the deal won’t give it an illegal advantage in the streaming market. 

The $72 billion tie-up joins the world’s dominant paid streaming service with one of Hollywood’s most iconic movie studios. It would reshape the market for online video content by combining the No. 1 streaming player with the No. 4 service HBO Max and its blockbuster hits such as Game Of Thrones, Friends, and the DC Universe comics characters franchise.  

That could raise red flags for global antitrust regulators over concerns that Netflix would have too much control over the streaming market. The company faces a lengthy Justice Department review and a possible US lawsuit seeking to block the deal if it doesn’t adopt some remedies to get it cleared, analysts said.

“Netflix will have an uphill climb unless it agrees to divest HBO Max as well as additional behavioral commitments — particularly on licensing content,” said Bloomberg Intelligence analyst Jennifer Rie. “The streaming overlap is significant,” she added, saying the argument that “the market should be viewed more broadly is a tough one to win.”

By choosing Netflix, Warner Bros. has jilted another bidder, Paramount Skydance Corp., a move that risks touching off a political battle in Washington. Paramount is backed by the world’s second-richest man, Larry Ellison, and his son, David Ellison, and the company has touted their longstanding close ties to President Donald Trump. Their acquisition of Paramount, which closed in August, has won public praise from Trump. 

Comcast Corp. also made a bid for Warner Bros., looking to merge it with its NBCUniversal division.

The Justice Department’s antitrust division, which would review the transaction in the US, could argue that the deal is illegal on its face because the combined market share would put Netflix well over a 30% threshold.

The White House, the Justice Department and Comcast didn’t immediately respond to requests for comment. 

US lawmakers from both parties, including Republican Representative Darrell Issa and Democratic Senator Elizabeth Warren have already faulted the transaction — which would create a global streaming giant with 450 million users — as harmful to consumers.

“This deal looks like an anti-monopoly nightmare,” Warren said after the Netflix announcement. Utah Senator Mike Lee, a Republican, said in a social media post earlier this week that a Warner Bros.-Netflix tie-up would raise more serious competition questions “than any transaction I’ve seen in about a decade.”

European Union regulators are also likely to subject the Netflix proposal to an intensive review amid pressure from legislators. In the UK, the deal has already drawn scrutiny before the announcement, with House of Lords member Baroness Luciana Berger pressing the government on how the transaction would impact competition and consumer prices.

The combined company could raise prices and broadly impact “culture, film, cinemas and theater releases,”said Andreas Schwab, a leading member of the European Parliament on competition issues, after the announcement.

Paramount has sought to frame the Netflix deal as a non-starter. “The simple truth is that a deal with Netflix as the buyer likely will never close, due to antitrust and regulatory challenges in the United States and in most jurisdictions abroad,” Paramount’s antitrust lawyers wrote to their counterparts at Warner Bros. on Dec. 1.

Appealing directly to Trump could help Netflix avoid intense antitrust scrutiny, New Street Research’s Blair Levin wrote in a note on Friday. Levin said it’s possible that Trump could come to see the benefit of switching from a pro-Paramount position to a pro-Netflix position. “And if he does so, we believe the DOJ will follow suit,” Levin wrote.

Netflix co-Chief Executive Officer Ted Sarandos had dinner with Trump at the president’s Mar-a-Lago resort in Florida last December, a move other CEOs made after the election in order to win over the administration. In a call with investors Friday morning, Sarandos said that he’s “highly confident in the regulatory process,” contending the deal favors consumers, workers and innovation. 

“Our plans here are to work really closely with all the appropriate governments and regulators, but really confident that we’re going to get all the necessary approvals that we need,” he said.

Netflix will likely argue to regulators that other video services such as Google’s YouTube and ByteDance Ltd.’s TikTok should be included in any analysis of the market, which would dramatically shrink the company’s perceived dominance.

The US Federal Communications Commission, which regulates the transfer of broadcast-TV licenses, isn’t expected to play a role in the deal, as neither hold such licenses. Warner Bros. plans to spin off its cable TV division, which includes channels such as CNN, TBS and TNT, before the sale.

Even if antitrust reviews just focus on streaming, Netflix believes it will ultimately prevail, pointing to Amazon.com Inc.’s Prime and Walt Disney Co. as other major competitors, according to people familiar with the company’s thinking. 

Netflix is expected to argue that more than 75% of HBO Max subscribers already subscribe to Netflix, making them complementary offerings rather than competitors, said the people, who asked not to be named discussing confidential deliberations. The company is expected to make the case that reducing its content costs through owning Warner Bros., eliminating redundant back-end technology and bundling Netflix with Max will yield lower prices.



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The rise of AI reasoning models comes with a big energy tradeoff

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December 5, 2025

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Nearly all leading artificial intelligence developers are focused on building AI models that mimic the way humans reason, but new research shows these cutting-edge systems can be far more energy intensive, adding to concerns about AI’s strain on power grids.

AI reasoning models used 30 times more power on average to respond to 1,000 written prompts than alternatives without this reasoning capability or which had it disabled, according to a study released Thursday. The work was carried out by the AI Energy Score project, led by Hugging Face research scientist Sasha Luccioni and Salesforce Inc. head of AI sustainability Boris Gamazaychikov.

The researchers evaluated 40 open, freely available AI models, including software from OpenAI, Alphabet Inc.’s Google and Microsoft Corp. Some models were found to have a much wider disparity in energy consumption, including one from Chinese upstart DeepSeek. A slimmed-down version of DeepSeek’s R1 model used just 50 watt hours to respond to the prompts when reasoning was turned off, or about as much power as is needed to run a 50 watt lightbulb for an hour. With the reasoning feature enabled, the same model required 7,626 watt hours to complete the tasks.

The soaring energy needs of AI have increasingly come under scrutiny. As tech companies race to build more and bigger data centers to support AI, industry watchers have raised concerns about straining power grids and raising energy costs for consumers. A Bloomberg investigation in September found that wholesale electricity prices rose as much as 267% over the past five years in areas near data centers. There are also environmental drawbacks, as Microsoft, Google and Amazon.com Inc. have previously acknowledged the data center buildout could complicate their long-term climate objectives. 

More than a year ago, OpenAI released its first reasoning model, called o1. Where its prior software replied almost instantly to queries, o1 spent more time computing an answer before responding. Many other AI companies have since released similar systems, with the goal of solving more complex multistep problems for fields like science, math and coding.

Though reasoning systems have quickly become the industry norm for carrying out more complicated tasks, there has been little research into their energy demands. Much of the increase in power consumption is due to reasoning models generating much more text when responding, the researchers said. 

The new report aims to better understand how AI energy needs are evolving, Luccioni said. She also hopes it helps people better understand that there are different types of AI models suited to different actions. Not every query requires tapping the most computationally intensive AI reasoning systems.

“We should be smarter about the way that we use AI,” Luccioni said. “Choosing the right model for the right task is important.”

To test the difference in power use, the researchers ran all the models on the same computer hardware. They used the same prompts for each, ranging from simple questions — such as asking which team won the Super Bowl in a particular year — to more complex math problems. They also used a software tool called CodeCarbon to track how much energy was being consumed in real time.

The results varied considerably. The researchers found one of Microsoft’s Phi 4 reasoning models used 9,462 watt hours with reasoning turned on, compared with about 18 watt hours with it off. OpenAI’s largest gpt-oss model, meanwhile, had a less stark difference. It used 8,504 watt hours with reasoning on the most computationally intensive “high” setting and 5,313 watt hours with the setting turned down to “low.” 

OpenAI, Microsoft, Google and DeepSeek did not immediately respond to a request for comment.

Google released internal research in August that estimated the median text prompt for its Gemini AI service used 0.24 watt-hours of energy, roughly equal to watching TV for less than nine seconds. Google said that figure was “substantially lower than many public estimates.” 

Much of the discussion about AI power consumption has focused on large-scale facilities set up to train artificial intelligence systems. Increasingly, however, tech firms are shifting more resources to inference, or the process of running AI systems after they’ve been trained. The push toward reasoning models is a big piece of that as these systems are more reliant on inference.

Recently, some tech leaders have acknowledged that AI’s power draw needs to be reckoned with. Microsoft CEO Satya Nadella said the industry must earn the “social permission to consume energy” for AI data centers in a November interview. To do that, he argued tech must use AI to do good and foster broad economic growth.



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