On Monday, Tesla’s board of directors granted Elon Musk a new two-year compensation package worth $29 billion. This move is seen as crucial as the company shifts focus from its struggling automotive sales to ventures like Robotaxis and humanoid robots.
The details of the agreement, which surfaced through an SEC filing, involve Musk being awarded 96 million shares in Tesla. This response comes amid a downturn in sales that has negatively impacted the company’s stock this year.
Interestingly, stocks experienced a more than 2% increase in pre-market trading.
“We understand that Elon has diverse business interests and demands on his time, but we believe this award will motivate him to stay engaged with Tesla,” a board member indicated.
Last year, a judge in Delaware dismissed Musk’s original stock-based compensation plan, which reportedly frustrated him enough that he decided to relocate Tesla’s headquarters from Delaware to Texas.
With a staggering net worth of $398 billion, Musk filed an appeal in March against the judge’s ruling.
The special committee overseeing this new agreement clarified that no “double dip” in compensation would occur if Musk’s initial deal were reinstated; instead, the new package would either be canceled or adjusted accordingly.
This committee is made up of just two members: Tesla Chairman Robin Denholm and Board Director Kathleen Wilson Thompson.
Musk, already Tesla’s largest private shareholder, owns about 13% of the company.
Analyst Dan Ives from Wedbush noted that this announcement is likely to remove a significant burden on Tesla’s stock and reassure investors regarding Musk’s commitment.
Ives pointed out that Musk’s ongoing involvement is critical for investors, especially considering the recent legal issues arising from Delaware.
He also emphasized the necessity for Tesla’s board to implement this long-term compensation strategy ahead of the shareholders’ meeting on November 6, which will address various pressing issues.
Under the terms of this new deal, Musk can only claim the shares if he remains a key executive at Tesla until at least 2027. The shares carry a five-year lockup, with the possibility to sell only for tax purposes.
Critics have often drawn comparisons between Musk’s compensation and that of other prominent tech CEOs like Microsoft’s Satya Nadella and Google’s Sundar Pichai. Many have argued that such high-level pay is unusual compared to their counterparts, who often lead with less extravagant packages.
In fact, only a handful of executives have managed to exceed $1 billion in yearly compensation in recent years, including Palantir’s Alexander Karp, who earned over $6 billion last year, and Hock Tan of Broadcom, who made $1.15 billion.
Moving forward, analysts highlight that Musk will need to ramp up his leadership efforts at Tesla. The company faces challenges due to its aging vehicle lineup and rising competition from firms like BYD in China.
Moreover, Musk’s forays into politics and public disagreements with figures like President Trump have sparked concern among shareholders.
As Tesla’s CEO, Musk emphasizes that ventures in AI, such as autonomous driving initiatives and the Optimus Humanoid Robots, are central to his long-term vision for the company.
With post wire
