The Tesla board has reinstated Elon Musk because the highest-paid CEO in historical past with a staggering new $29 billion pay bundle. His new cope with the $970 billion electric-vehicle maker comes after a Delaware decide twice rescinded Musk’s earlier moonshot mega-grant. Musk’s pay has been held up in litigation for the previous seven years.
“It’s crucial to retain and encourage our extraordinary expertise, starting with Elon,” Tesla board chair Robyn Denholm and fellow director Kathleen Wilson-Thompson wrote in a letter to shareholders. “The conflict for AI expertise is intensifying, with current months together with multibillion-dollar acquisitions of firms and nine-figure money compensation packages for non-founder, particular person AI engineers.”
Even in that choose group, “nobody matches” Musk, the board members wrote. Thus, the almost $30 billion award is important to conserving Musk centered on Tesla—and getting him to recruit new expertise to maintain the EV producer aggressive in AI, robotics, and robotaxis, based on the board. Not like Musk’s earlier pay plan, which included important shareholder worth hurdles he needed to overcome, all Musk has to do to gather the brand new award is stay with Tesla as CEO or in a senior government function for the following two years. He additionally has to carry the inventory till 2030, based on the phrases of the award, which can enhance his possession stake from round 13% to fifteen%.
Brian Dunn, a 40-year compensation practitioner and director of the Institute for Compensation Research at Cornell College, informed Fortune Musk’s new award resembles what some specialists have known as “fog-the-mirror grants.”
“For those who’re round and have sufficient breath left in you to fog the mirror, you get them,” stated Dunn. “These don’t have efficiency targets.”
Technically, the award will likely be made in restricted shares, however Musk has to pay $23.34 per share to personal the inventory—the identical strike worth as his 2018 choices. With Tesla’s inventory buying and selling at greater than $300 a share, the association provides Musk about $280 per share of built-in worth, which some comp specialists have known as “discounted choices.”
Larry Cunningham, director of the College of Delaware’s Weinberg Middle for Company Governance, stated that no matter how the award may very well be labeled for accounting or tax functions, there’s a easy and correct description for it.
“A deep-in-the-money inventory possibility grant, awarded solely for retention,” Cunningham informed Fortune in an announcement.
Musk’s pay bundle has a $26 billion ground
The brand new bundle creates what Farient Advisors’ Eric Hoffmann described as a “floor-and-ceiling” association tied on to the end result of the continued litigation in Delaware, which Tesla has appealed. If courts once more wipe out his authentic 2018 award of 303 million inventory choices, Musk will get to maintain the brand new 96 million shares, value about $29 billion on the present inventory worth. But when any a part of the unique grant will get reinstated, the brand new award will shrink accordingly, stated Hoffmann.
“There’s a clause that claims ‘no double dipping,’” he stated. “However this 96 million share award may very well be used to make up any of the unique grant if he loses in the middle of the authorized motion.”
Hoffmann stated the territory the Tesla board is treading is “unprecedented” in government compensation.
“There’s no playbook for this,” stated Hoffmann, who analyzed the phrases of the award. “They made the primary grant, it acquired overturned by a decide; they made one other grant, acquired it authorised by shareholders, after which that acquired held up.”
To degree set, a shareholder problem over Musk’s 2018 pay bundle led to a landmark opinion during which Musk’s pay was rescinded. The Tesla board then despatched the pay plan again to shareholders in 2024 for a say-on-pay vote approval, and shareholders voted in favor of giving Musk the comp. Final December, the identical decide—Delaware Courtroom Chancellor Kathaleen McCormick—declined to reverse her earlier resolution, which Tesla has since appealed.
In its letter to traders, the board wrote there’s no telling when the courtroom will rule once more and described this award as a “first step, ‘good religion’ cost to Elon.”
Nevertheless, Tesla’s efficiency in 2025 is a far cry from 2018, when the board first awarded Musk his daring moonshot grant. He adopted the award up by multiplying Tesla’s worth 12-fold. Its market cap surpassed $1 trillion in October 2021 and once more in Might 2025. However just lately Tesla has struggled. 12 months to this point, its share worth is down greater than 18%, and Musk has been lively politically, supporting President Donald Trump regardless of the affiliation turning off Tesla’s climate-focused shopper base, significantly in California.
And this time, the board has left little to probability. Tesla erected a big authorized barrier in Might that makes a problem to this award much more tough to mete out.
After McCormick’s ruling, Tesla shareholders authorised a transfer from being included in Delaware to Texas. In Might, Texas amended its enterprise code, and Tesla modified its bylaws accordingly a day later. The bylaw modification created a brand new threshold so any shareholder who desires to problem Musk’s pay in courtroom has to carry no less than 3% of Tesla’s inventory. The worth is value greater than $3 billion.
“The central theme right here is that Tesla has moved its jurisdiction of incorporation from Delaware to Texas, and consequently the propriety of Tesla’s actions and Musk’s compensation should be judged underneath Texas regulation, which is extra permissive,” wrote Columbia regulation professor John Espresso in an announcement to Fortune. “Tesla might get sued, however the odds are extra in its favor in Texas.”
Texas adopted Tesla’s transfer by enterprise a marketing campaign to make it a business-first state. At this level, it’s unclear how Texas courts would strategy a problem.
“It will likely be fascinating to see whether or not a Texas courtroom chooses to comply with Delaware’s analytical framework—or as a substitute declines to interact in related judicial scrutiny,” stated Cunningham. “The result might affect how different firms weigh the relative deserves of Delaware versus Texas as a company dwelling.”
Buyers react to Musk’s comp
Tesla has a veritable military of engaged particular person retail traders, and lots of assist Musk and have voted in favor of his comp plan twice now, getting it over the road with greater than majority assist.
Nevertheless, some pension fund leaders who oversee retiree belongings invested in Tesla inventory have been lower than thrilled about Musk’s new award.
“A $29 billion compensation bundle for any CEO, not to mention one who has been largely absent from their every day duties as gross sales and inventory worth proceed to fall wanting investor expectations, is obscene,” stated New York Metropolis Comptroller Brad Lander in an announcement.
Lander stated Tesla’s board is enriching Musk at traders’ expense, “as soon as once more.”
Illinois State Treasurer Michael Frerichs informed Fortune a $29 billion comp bundle is “egregious on its face.”
“However in mild of Elon Musk’s inattention to the day-to-day wants of Tesla, and the corporate’s worse than anticipated inventory worth, the bundle suggests a board out of step with their duties to traders,” Frerichs wrote in an announcement. “With revenues falling wanting expectations, the board needs to be much less involved with paying fealty to a grasping CEO than with long-term planning for the success of the corporate. Shareholders ought to demand higher company governance.”
SOC Funding Group, which represented a gaggle of traders with almost 8 million shares invested in Tesla, informed Fortune in an announcement that at present’s announcement included a hanging admission from the board. “Even an extra $24B in fairness won’t encourage Elon Musk to remain for 2 extra years, not to mention be sure that he commit adequate time and a focus to show across the presently slumping gross sales,” SOC wrote.
