Tesla's Board of Directors Establishes a Specific Group to Investigate Potential Compensation Plans for Elon Musk
Tesla Announces New $29 Billion Compensation Package for Elon Musk
Tesla has unveiled a new compensation package for CEO Elon Musk, worth approximately $29 billion, following the invalidation of the 2018 pay deal by a Delaware court. The new plan, consisting of 96 million restricted stock shares, is aimed at retaining Musk's leadership during a critical period for the electric vehicle company.
The new package is contingent on Musk remaining in an executive role such as CEO through the vesting period, which is scheduled for around August 2027. The shares will vest only if Musk continues as CEO or holds certain executive roles without interruption. Musk must pay $23.34 per share, matching the original 2018 strike price, to exercise the shares. He will be subject to a five-year sale restriction, meaning he cannot sell vested shares until approximately August 2030.
The special committee, which was established by the Tesla board of directors, comprises board chair Robyn Denholm and director Kathleen Wilson-Thompson. The committee has engaged law firm McDermott Will & Emery for advice on Texas corporate law, as Tesla reincorporated in Texas in 2024. The committee is also considering backpay solutions should the Delaware Supreme Court uphold the original ruling.
The new package aims to align Musk's interests with Tesla's long-term success while addressing shareholder concerns. The previous package raised concerns about potential dilution and shareholder value. Analysts believe that this revised plan, which ties Musk’s rewards more closely to sustained leadership and long-term company performance, should alleviate investor worries.
The court rejected the reinstatement of the 2018 compensation deal, criticizing the board for prioritizing Musk's interests over fiduciary duties to shareholders. Any new compensation package would require shareholder approval, and the timing of Tesla's annual shareholder meeting may be delayed to accommodate deliberations on a new package.
Investors have expressed concerns about Musk's divided attention due to his leadership roles outside of Tesla, including the social media platform X, artificial intelligence firm xAI, and the Trump administration's Department of Government Efficiency.
The decision on the new compensation package is expected later this year. Tesla confirmed the formation of the committee in a recent regulatory filing.
The new $29 billion compensation package for Elon Musk, mirroring his role in Tesla's business, is linked to the performance of technology-focused ventures, as his leadership expands to include not only the electric vehicle company but also other sectors such as X, xAI, and government efficiency. The financially-stipulated package aims to harmonize Musk's interests with long-term company prosperity, addressing the concerns of business analysts and shareholders about potential shareholder value dilution.
