Tesla (TSLA) has moved to give Elon Musk about $26 billion worth of shares as part of a new CEO compensation plan without shareholders’ approval.
The company’s last CEO award dates back to 2018, but it was rescinded by a judge last year after a long litigation determined that CEO Elon Musk virtually negotiated the award against himself due to his control of the board.
In a letter to shareholders, Tesla’s board described the new award, which is explained as an “interim award to make it right by Musk”:
- 96 million restricted shares of stock, subject to Elon paying a purchase price upon meeting a two-year vesting term, to be delivered after receipt of antitrust regulatory approval;
- The purchase price will be equal to the split adjusted exercise price of the stock options awarded to Elon under the 2018 CEO Performance Award ($23.34 per share);
- A requirement that Elon serve continuously in a senior leadership role at Tesla during the two-year vesting term;
- A pledging allowance to cover tax payments or the purchase price;
- A mandatory holding period of five years from the grant date, except to cover tax payments or the purchase price (with any sales for such purposes to be conducted through an orderly disposition in coordination with Tesla); and
- If the Delaware courts fully reinstate the 2018 CEO Performance Award, this interim award will be forfeited or returned or a portion of the 2018 CEO Performance Award will be forfeited. To put it simply, there cannot be any “double dip.” Elon will not be able to keep this new award in addition to the options he will be awarded under the 2018 CEO Performance Award should the courts rule in our favor.
Tesla made it sound like this award has been automatically awarded after board approval, and unlike previous awards, Tesla shareholders won’t vote on it.
Here’s how the new compensation package differs from the previous one:
| Aspect | 2018 CEO Performance Award | 2025 CEO Interim Award |
|---|---|---|
| Structure | Stock options (303.96 million shares, post-stock-split adjusted) with an exercise price of $23.34 per share. | Restricted stock (96 million shares) with a purchase price of $23.34 per share (matching the 2018 exercise price). |
| Vesting Conditions | Performance-based: Vested in 12 tranches, each requiring Tesla’s market cap to increase by $50 billion (up to $650 billion total) plus revenue or adjusted EBITDA milestones. Fully vested by early 2023 after all targets were met. | Time-based: Vests after 2 years of continuous service in a senior leadership role at Tesla. No performance milestones required. |
| Value | Grant-date fair value: ~$2.3 billion. Potential realized value: Up to ~$56 billion (fluctuated with stock price; valued at ~$46.8 billion in mid-2024). Net value depended on stock appreciation above strike price. | Gross value: ~$29 billion (based on Tesla’s stock price of ~$300 per share). Net value after purchase price: ~$26.7 billion. |
| Duration/Term | 10-year plan, with milestones spanning the full period. | 2-year vesting period, plus a 5-year mandatory holding period after grant (except for covering taxes or purchase price). |
| Risk and Alignment | High risk/high reward: Tied to unprecedented growth targets (e.g., market cap from ~$50B to $650B+), resulting in ~$735 billion in shareholder value created. Musk received no base salary or other pay during this time. | Lower risk: Primarily retention-focused, with vesting guaranteed upon service. Includes provisions for pledging shares to cover taxes/purchase price. Interim nature ties it to ongoing 2018 legal resolution. |
| Additional Terms | Required shareholder approval (passed in 2018, reaffirmed in 2024). No explicit long-term hold requirement beyond standard executive rules. | Requires antitrust regulatory approval. If 2018 award is reinstated, this is offset/forfeited. Approved by board’s special committee (Musk recused). A longer-term compensation strategy is planned for shareholder vote in November 2025. |
| Purpose/Context | Long-term incentive to drive explosive growth in EVs and energy. Musk’s first major comp since 2012. | Interim retention amid AI/robotics pivot and talent competition. Recognizes past value from 2018 milestones while legal battles continue (no meaningful pay for Musk since 2017). |
Separately, the board also announced that a new “longer-term” CEO award is being put together by the board and will be presented at the upcoming shareholders’ meeting in November.
Electrek’s Take
One of the biggest paydays in history, and it’s to the CEO of a company in evident decline with net income in freefall for the last two years.
However, it is moot to discuss current performance since Tesla clearly frames this as a way to replace the 2018 compensation package.
But it’s still incredible that to unbiased outsiders watching Tesla, the company is clearly in decline. Yet, Tesla’s board has just given Musk $26 billion, despite him being undoubtedly responsible for this decline, and says that it will offer him a bigger, longer-term contract soon on top of it.
It’s going to be hard to beat the allegations that the board is entirely in his pocket after that.
Also, that’s despite Musk already being the person most incentivize to make Tesla succesful as the biggest Tesla shareholder and him breaching his fiduciary duty to shareholders last year when he threatened not to build AI products at Tesla, somethign he said was crucial to the company’s success, if he didn’t get 25% control over the company’s shares.
This new grant will only bump him to about a 15% stake.
I expect this new compensation package in November to push him to 25%.
At the most recent earnings meeting, Musk stated that his goal for greater control over Tesla is to ensure that activist investors can’t oust him, but “not so much control that he can’t be thrown out if he goes crazy.”
He already went crazy and the board rewarded him with a $26 billion payday and an upcoming new compensation plan.
He clearly already has plenty of control over the company.
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