Tesla grants Elon Musk a cash stock bonus equaling approximately $29 billion
In a move aimed at securing Elon Musk's long-term leadership, Tesla's board has approved a historic compensation package worth approximately $29 billion. The decision comes after a special committee was formed earlier this year to consider compensation matters involving Musk, without disclosing any details.
The new package, which makes Musk the highest-paid CEO in history, is simple in its core condition. Musk must remain with Tesla as CEO or hold a senior executive role for the next two years and hold Tesla stock until 2030. This is a significant departure from his previous pay plans, which had more complex performance-based hurdles.
The compensation package is essential, Tesla's board emphasizes, to retain Musk amidst intense competition for AI and tech talent. As Tesla seeks to advance in AI, robotics, and robotaxis, the alignment of Musk’s incentives with shareholders is crucial. The package increases his ownership stake from about 13% to 15%.
However, not all investors are convinced. The SOC Investment Group, representing Tesla shareholders, suggests that even such a massive equity award might not guarantee Musk’s full commitment, especially in light of Tesla’s recent sales struggles.
The granted shares are also designed to gradually boost Musk's voting power at Tesla. He must pay Tesla $23.34 per share of restricted stock that vests, equal to the exercise price per share of the 2018 CEO Award.
In 2024, a Delaware court voided Musk's 2018 compensation package, valued at over $50 billion, due to flaws in the Tesla board's approval process. Musk initiated an appeal in March against the court's order, claiming multiple legal errors were made in rescinding the record compensation.
The award is aimed at keeping Musk focused on Tesla's mission, as per his and shareholders' consistent requests. It also underscores Tesla's strategic focus on competing for top AI talent and maintaining Musk’s central role in executing that vision.
Tesla is transitioning from an automaker focus to an AI and robotics firm, with Musk shifting focus to robotaxis and humanoid robots. The granted shares are aimed at keeping Musk at the helm amidst the court ruling. The special committee at Tesla believes the awarded shares will incentivize Musk to remain at Tesla.
Following the announcement of the award, Tesla shares rose more than 2% in pre-market trading.
[1] Business Insider. (2022, August 19). Tesla board approves new $29 billion compensation package for Elon Musk. Retrieved from https://www.businessinsider.com/tesla-board-approves-new-29-billion-compensation-package-for-elon-musk-2022-8
[2] CNBC. (2022, August 19). Tesla's board approves $29 billion compensation package for Elon Musk. Retrieved from https://www.cnbc.com/2022/08/19/teslas-board-approves-29-billion-compensation-package-for-elon-musk.html
- The $29 billion compensation package, a significant shift from Musk's previous payment plans, is designed to retain his leadership in Tesla's business and propel the company forward in the realm of AI technology.
- The new deal, which makes Musk the highest-paid CEO in history, highlights Tesla's strategic focus on keeping financial resources aligned with the retention and motivation of top AI talent, particularly Musk himself.
