Tesla’s board of directors has approved a new compensation package for Chief Executive Elon Musk valued at roughly $30 billion, a move designed to keep the billionaire at the helm of the electric carmaker while the company continues to battle in court over his contested 2018 pay plan.
The award, disclosed Monday in a regulatory filing, grants Musk 96 million shares of restricted stock.
The shares will vest if Musk remains in a senior leadership role at Tesla for the next two years. The exercise price was set at $23.34 per share, identical to the terms of the disputed 2018 package, and Musk must hold the shares for five years from the grant date.
Tesla’s board framed the award as a “good faith” measure while litigation continues. The directors signaled that a longer-term compensation strategy for Musk would be presented at Tesla’s annual meeting on November 6.
Some context
The move comes after the Delaware Chancery Court earlier this year voided Musk’s $50 billion compensation plan from 2018, ruling in favor of a shareholder who argued that the package was excessive and improperly approved. Tesla, which relocated its legal home to Texas last year, has appealed the decision.
A special two-member committee of the board chair, Robyn Denholm, and director Kathleen Wilson-Thompson has been tasked with crafting a new arrangement while the appeal plays out.
Tesla stock rose as much as 2.9% in premarket trading on Monday. Still, shares remain down about 25% this year, compared with a 6% gain in the S&P 500.
In its filing, Tesla’s board argued that the new award was necessary to retain Musk “against the backdrop of the ever-intensifying AI talent war and Tesla’s position at a critical inflection point.” Should the courts reinstate the 2018 award, Musk would be required to forfeit or return the interim stock grant. “To put it simply, there cannot be any ‘double dip,’” the filing stated.
What you should know
Musk, 53, has served as Tesla’s chief executive since 2008 and has often hinted at his long-term commitment. In an interview with Bloomberg earlier this year, he said he expects to remain in charge of Tesla five years from now.
Still, his leadership of Tesla is complicated by his extensive commitments elsewhere. Musk oversees SpaceX, Neuralink, the Boring Company, X Corp. (formerly Twitter), and his artificial intelligence start-up, xAI. His political activities, including financing former President Donald J. Trump’s re-election campaign, have drawn scrutiny and, at times, criticism of Tesla.
The board, however, said it remains confident that the new award will keep Musk focused on the automaker. “To be clear, losing Elon would not only mean the loss of his talents but also the loss of a leader who is a magnet for hiring and retaining talent at Tesla,” the letter said.(Nairametrics)
