Tesla has granted CEO Elon Musk a new compensation package consisting of 96 million shares of restricted stock valued at approximately $29 billion. This award comes just six months after a Delaware judge invalidated Musk’s previous compensation plan.
According to a regulatory filing submitted on Monday, the electric vehicle manufacturer has established specific conditions for this new stock grant. Musk must first purchase Tesla shares at $23.34 per share before receiving the full benefit of the award.
Details of the New Compensation Package
The 96 million shares represent about 3% of Tesla’s outstanding stock. This new grant follows the controversial cancellation of Musk’s previous compensation package, which was valued at approximately $56 billion and had been approved by shareholders in 2018.
In January, Delaware Chancellor Kathaleen McCormick ruled that Tesla’s board had failed to prove the previous pay package was fair, describing it as an “unfathomable sum” that was negotiated by directors who appeared too close to Musk. The court ordered Tesla to void the package, a decision that prompted significant backlash from Musk.
The new stock grant includes specific performance metrics that Musk must achieve for the shares to vest. These targets are tied to Tesla’s market capitalization and operational milestones, though the exact details remain partially undisclosed in the initial filing.
Shareholder Response and Corporate Governance
Tesla’s decision to award Musk a new compensation package so soon after the court ruling has raised questions about corporate governance at the company. Some institutional investors have expressed concern about the board’s independence and decision-making process.
The company plans to hold a shareholder vote to approve the new package, likely at its annual meeting. This vote will be closely watched by investors and corporate governance experts as a test of shareholder sentiment toward Musk’s leadership and compensation.
Several major proxy advisory firms are expected to issue recommendations to shareholders regarding how to vote on the proposal. These firms typically evaluate executive compensation based on performance metrics, peer comparisons, and governance practices.
Impact on Tesla’s Future
The new compensation structure appears designed to keep Musk engaged with Tesla amid his numerous other ventures, including SpaceX, Neuralink, and X (formerly Twitter). Musk has previously suggested he might focus less on Tesla without a substantial stake in its future growth.
Tesla’s stock price has experienced volatility in recent months due to concerns about slowing electric vehicle demand, increased competition, and Musk’s divided attention. The company recently announced layoffs affecting approximately 10% of its workforce as part of cost-cutting measures.
Industry analysts have noted that tying Musk’s compensation to Tesla’s future performance could help align his interests with those of long-term shareholders. However, questions remain about whether such a large compensation package is necessary to retain his services.
The regulatory filing indicates that the award is contingent on Musk remaining as either CEO or in combined roles of Executive Chairman and Chief Product Officer, giving him some flexibility in his future role at the company.
Tesla’s board justified the new package by citing Musk’s critical role in the company’s strategy and growth. The filing emphasized that his leadership has been instrumental in Tesla’s transformation from a niche automaker to one of the world’s most valuable companies.
As Tesla navigates challenges in the electric vehicle market and expands into new areas like artificial intelligence and robotics, the board appears convinced that keeping Musk financially invested in the company’s success remains essential for its future prospects.
