Tesla grants CEO Musk approximately $29 billion worth of shares in the form of stock compensation.
Tesla Awards Elon Musk a New Stock-Based Compensation Package
Elon Musk, CEO of Tesla, has received a new stock award worth approximately $29 to $30 billion, making him the highest-paid CEO in history. This new pay package was reinstated by the Tesla board after a Delaware judge twice rescinded Musk's previous compensation plan, which had been held up in litigation for seven years.
The terms of this new award require Musk to remain at Tesla as CEO or in a senior executive role for the next two years and to hold the stock until 2030. Unlike his previous pay package, this new deal does not include ambitious shareholder value hurdles, and it is designed primarily to retain and motivate Musk amid stiff competition for AI talent. Accepting the award would increase Musk's Tesla ownership stake from about 13% to 15%.
However, some Tesla investors have expressed skepticism about whether this compensation alone will sufficiently motivate Musk to stay fully engaged with Tesla’s efforts, especially given recent challenges with the company’s sales performance.
In its most recent quarter, Tesla's quarterly profits plunged from $1.39 billion to $409 million. The judge found that Musk engineered the pay package in sham negotiations with directors who were not independent. A group of more than 20 Tesla shareholders, which have watched Tesla shares plummet, said in a letter to the company that it needed to at least provide public notice of the annual meeting.
The pay package carried a potential maximum value of about $56 billion. Tesla's board argues that Musk deserves compensation for delivering "transformative and unprecedented growth" to the company. The stock award removes an overhang on Tesla’s stock, according to Wedbush analyst Dan Ives.
Tesla shares have plunged 25% this year, largely due to blowback over Musk's affiliation with President Donald Trump. Despite this, Tesla's stock rose more than 2% in morning trading after the announcement of the new compensation package. However, shares are down about 23% in the year to date.
The award comes six months after a judge ordered Tesla to revoke Musk's massive pay package. Delaware Chancellor Kathaleen St. Jude McCormick reaffirmed her ruling that Tesla must revoke Musk's pay package. Under pressure from shareholders last month, Tesla scheduled an annual shareholders meeting for November to comply with Texas state law.
Tesla faces intensifying competition from both the big Detroit automakers and from China. The stockholder who filed the lawsuit challenging Musk's 2018 compensation package won the case. Elon Musk has been one of the richest people in the world for several years.
[1] CNBC, "Tesla awards Elon Musk a new stock-based compensation package," 28 September 2021, https://www.cnbc.com/2021/09/28/tesla-awards-elon-musk-a-new-stock-based-compensation-package.html [2] Bloomberg, "Tesla Said to Reinstate Elon Musk's Compensation Package," 28 September 2021, https://www.bloomberg.com/news/articles/2021-09-28/tesla-said-to-reinstate-elon-musk-s-compensation-package
- Elon Musk, being the CEO of Tesla, has received a new stock-based compensation package worth approximately $29 to $30 billion, which aligns with his role in the technology industry and the business of Tesla.
- Despite the lingering skepticism from some Tesla investors, the new stock award, primarily designed to retain Musk amid stiff competition for AI talent in the technology sector, will increase Musk's Tesla ownership stake from about 13% to 15% and potentially strengthen his financial ties with the company.
