Tesla is awarding Elon Musk over $29 billion of stock in an "interim" pay plan designed to maintain his interest in the company while a larger pay package awarded in 2018 remains held up in court.
"Retaining Elon is more important than ever before... It is imperative to retain and motivate our extraordinary talent, beginning with Elon," Tesla Board Chair Robyn Denholm and board member Kathleen Wilson-Thompson wrote in a letter to shareholders today.
The letter noted that Musk has several other companies to run.
"While we recognize that Elon's business ventures, interests and other potential demands on his time and attention are extensive and wide-ranging, including his leadership roles at xAI, SpaceX, Neuralink, X Corp., and The Boring Company as well as his other interests, we are confident that this award will incentivize Elon to remain at Tesla and focus his unmatched leadership abilities on further creating shareholder value for Tesla shareholders and attracting and retaining talent at Tesla. 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.
The interim award announced in a Securities and Exchange Commission filing is for 96 million shares worth about $29.5 billion based on today's stock price, which was around $307 as of this writing. Musk would pay the company $23.34 per share, the same purchase price in his 2018 pay plan. The 2018 plan was for 303.96 million shares, currently worth over $93 billion.
Tesla and Musk still fighting for bigger pay plan
The 2018 pay plan was voided by the Delaware Court of Chancery in a January 2024 ruling on a shareholder lawsuit. Judge Kathaleen McCormick's ruling said the Tesla board never asked whether the plan was necessary for Tesla to retain Musk, and that "five of the six directors who voted on the Grant were beholden to Musk or had compromising conflicts."
Tesla held a June 2024 shareholder vote to re-approve the pay plan, but McCormick rejected it again in December 2024. Tesla's letter to shareholders today said the company's "legal efforts continue in the Delaware courts to reinstate the 2018 CEO Performance Award." The letter said there is "no clear timeline for resolution" of the court case as Tesla is waiting for a hearing to be scheduled at Delaware Supreme Court.
"As we told you last year, the 2018 CEO Performance Award resulted in a $2.3 billion stock-based compensation charge to Tesla but brought about $735 billion of increased market capitalization," the letter said. "Despite delivering such extraordinary returns, that award continues to be in legal limbo despite two separate shareholder votes supporting it by large margins."
Tesla said it is awarding the 96 million shares under the company's 2019 Equity Incentive Plan. This means that Tesla is avoiding a new shareholder vote because shareholders already approved the 2019 plan, wrote Ann Lipton, a professor at University of Colorado Law School.
Lipton wrote that "no one thought the 2019 plan would apply to Musk at the time." She pointed to a statement Tesla made in 2019 when it proposed the Equity Incentive Plan.
"The Board intends the 2018 CEO Performance Award to be the exclusive form of compensation for Mr. Musk until it is completed, expires or otherwise terminates," Tesla said at the time.
“Keeping Elon’s energies focused on Tesla”
Denholm and Wilson-Thompson said in their letter that the 96 million-share award is "a critical first step" toward achieving the goal of "keeping Elon's energies focused on Tesla."
"This interim award is structured to incrementally increase his voting rights upon grant, which he has repeatedly told us—and shareholders have confirmed—is an important part of incentivizing him to stay focused on the critical work we are doing here at Tesla. We believe this is a vital consideration, and we used the tools currently available to us—our existing equity incentive plan—to grant this award," they wrote.
The Tesla board approved the interim award yesterday, with recusals from Musk and his brother, Kimbal. The Tesla board is still working on "a longer-term CEO compensation strategy, which we plan to put to a shareholder vote at the November 6 annual meeting," the letter said.
The interim award would vest in two years, and Musk would be required to hold the stock for five years. It has a provision preventing Musk from being paid twice for the same time period in the event that the 2018 plan is reinstated.
"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," the letter to shareholders said. "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 brand loyalty plummeted
While the interim award would boost Musk's ownership of Tesla from about 13 percent to 16 percent, getting the full 2018 pay plan would give him over 20 percent of the company, the Financial Times wrote. Musk complained last month, "I've got so little control that I can easily be ousted by activist shareholders after having built this army of humanoid robots."
Amid disappointing sales figures, Tesla's stock price has fallen 19 percent since the beginning of 2025. Tesla's brand loyalty among US-based customers collapsed after Musk backed Trump in the presidential race last year, according to S&P Global Mobility research cited in a Reuters report today.
The data shows that "Tesla's customer loyalty peaked in June 2024, when 73 percent of Tesla-owning households in the market for a new car bought another Tesla," the report said. But that rate fell to 49.9 percent by March 2025, below the industry average, though it rebounded to 57.4 percent in May. The numbers are based on vehicle registration data in all 50 states, the report said.
"I've never seen this rapid of a decline in such a short period of time," S&P analyst Tom Libby told Reuters.
Apple lavora a super sensori foto per iPhone: sensibili come le pupille umane