Tesla has approved the allocation of 96 million shares to CEO Elon Musk, a move worth approximately $29 billion, marking a significant milestone in the billionaire’s compensation package. This stock allocation is part of a long-term incentive plan established in 2018, which ties Musk’s earnings to the company’s performance.
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A complex history of remuneration
Musk’s compensation structure has been a subject of legal battles since its inception. In 2018, Tesla’s shareholders approved a performance-based pay plan, granting Musk stock options contingent on achieving various milestones over the course of ten years. Initially valued at $56 billion, the plan has faced multiple legal challenges. A Delaware judge annulled it in January 2024, ruling that shareholders were misled during the approval process. However, in June 2024, Tesla’s shareholders revalidated the plan.
The legal battle continues
Despite the legal hurdles, Tesla has continued to defend its decision to grant Musk stock options. In December 2024, another legal ruling in Delaware rejected the plan, but Tesla has appealed. The company argued that the compensation is necessary to retain Musk, especially as the company is at a pivotal point in its growth, facing challenges like declining car sales and expanding into AI, robotics, and autonomous taxis.
Musk’s role at Tesla
Elon Musk does not receive a traditional salary from Tesla; instead, his compensation is entirely performance-based. His substantial earnings from Tesla stem from stock options, allowing him to purchase shares at a much lower price than the market value. This system, in place since 2018, incentivizes Musk to remain at the helm of Tesla, benefiting from the company’s long-term success.
Market reaction
Following the announcement, Tesla’s stock saw a modest increase of 2% in pre-market trading. This news comes at a time when Tesla’s stock has experienced a 25% drop this year, highlighting the company’s struggles in certain areas of its business. However, analysts believe that the new compensation plan could help secure Musk’s leadership at Tesla for the foreseeable future.
Tesla’s decision to grant such a large sum of stock underscores the ongoing complexities surrounding Musk’s leadership, the company’s compensation policies, and the broader implications for its shareholders.
