Tesla's Board Sets up a Special Group to Investigate New Compensation Plan for Elon Musk
In a move aimed at retaining CEO Elon Musk during a critical inflection point for the company, Tesla has granted him a temporary stock award worth approximately $29 billion. This interim deal comes after a court ruling voided his original 2018 pay package worth around $56 billion.
Key details of this new package include:
- Musk must pay $23.34 per share for the restricted stock that vests, matching the exercise price of the 2018 package.
- The package is a "good faith" interim arrangement designed to retain Musk's leadership while legal reviews of the original pay deal continue.
- The shares have a built-in value of roughly $280 per share above the strike price, given Tesla’s current stock trading above $300, making these options deeply "in the money".
- If the Delaware Supreme Court overturns the January 2024 decision that voided the 2018 package, this new award will be voided accordingly. If any portion of the original grant is reinstated, the new package will shrink proportionally.
- The company plans to propose a longer-term CEO compensation strategy to shareholders at the annual meeting in November 2025.
- Details on vesting schedules and performance metrics for the interim award have not yet been disclosed.
The committee tasked with developing potential new stock options or alternative compensation for Musk is comprised of board chair Robyn Denholm and director Kathleen Wilson-Thompson. They have engaged law firm McDermott Will & Emery for advice on Texas corporate law, as Tesla reincorporated in Texas in 2024, and any new pay package for Musk would be governed by Texas law, not Delaware's.
This interim deal is partly justified by the "ever-intensifying AI talent war" and Tesla's strategic transition toward being an AI-centered company, with Musk having also started his own AI firm, xAI. However, some shareholder groups have expressed skepticism about whether even this massive pay is adequate motivation to keep Musk fully focused on Tesla's turnaround amid recent challenges and Musk’s other ventures.
The court rejected the reinstatement of the previous compensation deal, criticizing the board for prioritizing Musk's interests over fiduciary duties to shareholders. The decision on the new compensation package is expected later this year, and any new package would require shareholder approval. The timing of Tesla's annual shareholder meeting may be delayed to accommodate the committee's deliberations.
References:
- Tesla grants Elon Musk $29 billion stock award as legal reviews continue
- Tesla grants Elon Musk a new $29 billion stock award as legal reviews continue
- Tesla Grants Elon Musk $29 Billion Stock Award Amid Ongoing Legal Reviews
- Tesla grants Elon Musk $23.34-per-share stock award worth $29 billion
- Tesla Grants Elon Musk a $29 Billion Stock Award Amid Ongoing Legal Reviews
- The temporary stock award worth approximately $29 billion for Tesla's CEO Elon Musk is a strategic move amid the company's critical business phase, intertwining finance, technology, and leadership in the transition of Tesla toward an AI-centered company.
- The finance and technology sectors play significant roles in the ongoing legal reviews and discussions regarding Elon Musk's $29 billion stock award at Tesla, as the company explores new compensation strategies to ensure Musk's continued focus on the business's future.
