What happens when C-suite pay becomes all or nothing

Moonshot executive compensation packages, which tie virtually all CEO pay to ambitious, long-term market capitalization growth targets, are gaining traction, exemplified by Axon CEO Rick Smith's 2018 deal. Smith's success in growing Axon's value tenfold within five years, leading to a >600% stock surge and a $165 million payout, underscores the potential for significant shareholder alignment and performance. While these highly volatile structures are seen as critical for attracting elite talent and fostering long-term value creation, they also present calibration challenges and investor concerns regarding oversized payouts and asymmetric risk.

Analysis

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 had blown past each goal and became the highest-paid CEO in America in 2024 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 executive 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 [e-mail] 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. 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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 A trend toward “moonshot” executive compensation packages, which tie CEO remuneration almost exclusively to ambitious, long-term market capitalization targets, is gaining notable traction in corporate governance. This model, first popularized by Tesla's 2018 plan for Elon Musk, is exemplified by the recent success at Axon Enterprise (AXON). In 2018, CEO Rick Smith accepted a plan with virtually no salary or bonus, contingent on growing Axon's market cap from $2.5 billion to $13.5 billion within a decade. Smith achieved these milestones in just five years, driving a stock surge of over 600% and resulting in a $165 million compensation package in 2024. Proponents argue these structures create powerful alignment with shareholder interests and incentivize long-term strategic thinking, as seen with Axon extending a version of the plan to employees. However, the model is not without significant controversy and risk, reflected in the mixed overall sentiment. These plans are inherently volatile, difficult to calibrate, and can face pushback from investors concerned about oversized payouts if targets are met too quickly or the asymmetric risk if they are missed entirely. While the structure is spreading as a tool to attract and retain elite talent focused on transformative growth, its capacity to create enduring value versus a temporary surge remains an open question.

Key Decisions for Investors

• Investors in companies adopting moonshot compensation plans, such as Axon, should rigorously scrutinize the calibration of performance targets to assess whether they represent genuine stretch goals or risk excessively dilutive payouts.
• The success of Axon's model, evidenced by its 600% stock appreciation, suggests that such high-risk, high-reward incentive structures can act as a powerful catalyst, warranting a closer look at companies where management has significant 'skin in the game' through similar long-term equity plans.