Tesla awards Elon Musk $29 billion in stock amid compensation battle. What to know
A special committee of the company's board of directors said the interim pay package would motivate Musk to "stay focused" on Tesla as the electric vehicle maker pivots to robotics and artificial intelligence.
Under the pay plan, Musk would receive 96 million shares valued at around $300 each as long as he remains in an executive position at Tesla for the next two years. On Musk's social media platform X, the special committee said the executive has not received "meaningful compensation" for his work for eight years.
One of the world's richest people, Musk owns about 13% of Tesla shares, making him the largest individual shareholder. The company is worth more than $969 billion based on current share prices. Tesla shares on Monday closed at $309.26, up 2%.
Why did the board approve this plan?
Tesla board members Robyn Denholm and Kathleen Wilson-Thompson said on X that the $29 billion award is a first step, "good faith" effort to compensate Musk in lieu of a longer term plan.
As Musk splits his time and energy among several ventures, including AI startup xAI and space exploration firm SpaceX, Tesla board members said they are eager to keep his attention focused on the electric vehicle maker. Musk has garnered criticism from investors for getting distracted by his temporary role in the Trump administration.
Tesla shares have fallen more than 18% this year following significant brand damage and plunging vehicle sales. The company is at a critical turning point where it must pivot to robotics and autonomous driving technology to remain competitive, analysts said. Musk has overseen Tesla's robotaxi launch in Austin, Texas, and frequently touts the potential of the humanoid robot Optimus.
"While these impending changes are exciting, the outcomes are not guaranteed," wrote Denholm and Wilson-Thompson. "It is imperative to retain and motivate our extraordinary talent, beginning with Elon."
"We are confident that this award will incentivize Elon to remain at Tesla," they wrote.
What happened to Musk's previous pay package?
A Delaware judge has twice struck down a 2018 executive pay package that would have awarded Musk more than $55 billion in stock, arguing that Musk exerted unfair control over the negotiation process.
In 2018, Tesla shareholder Richard Tornetta sued the company to block the compensation plan, claiming the board misled investors and was not transparent about the approval process. Tornetta and his attorneys also argued that the board was too susceptible to Musk's influence.
Chancellor Kathaleen McCormick, the judge in the case, sided with Tornetta and rescinded the entire pay package, calling it an "unfathomable sum." McCormick denied the pay plan again in 2024, after the board held another vote to approve it. Tesla has since appealed McCormick's second decision, citing his contributions to Tesla's growth.
"This compensation issue has been a constant concern of shareholders once the Delaware soap opera began," Tesla analyst Dan Ives wrote in a note.
If the 2018 plan is ultimately approved after legal battles, the recent $29 billion package will be thrown out to prevent double dipping, the board said.
How does Musk's pay compare to other chief executives?
The pay package brought to court in 2018 was the largest potential compensation plan for an executive of a publicly traded company, McCormick said, worth 250 times as much as the median peer pay.
The new plan is still the highest executive compensation package by far. Blackstone Chief Executive Stephen Schwarzman earned $1.39 billion in 2008, compared to the $29 billion interim package for Musk. Another top earner, Palantir CEO Alexander Karp, earned $1.10 billion in 2020.
In 2018, Musk agreed to forgo a cash salary for his work at Tesla and instead receive stock options based on his ability to meet company milestones. Board members argue that the value Musk brings to the company is worth hefty compensation.
"We can all agree that Elon has delivered the transformative and unprecedented growth that was required to earn all milestones of the 2018 CEO Performance Award," the board's special committee wrote. "Retaining Elon is more important than ever before."
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