Tesla boosts Elon Musk's compensation, with an astonishing increased paycheck revealed
In a move aimed at securing the future of Tesla, the company's board has approved a new pay package for CEO Elon Musk. The deal, worth approximately $29 billion, consists of a replacement stock award of 96 million restricted shares at a strike price of $23.34 per share.
The new package comes after Musk's previous compensation plan was invalidated by a Delaware court in 2018, due to concerns about shareholder approval and board independence. Tesla is currently appealing this decision.
The new pay package is structured as a deep-in-the-money stock option grant, designed primarily for retention, without additional performance targets. Known as "fog-the-mirror grants," this type of compensation is intended to keep Musk engaged while the legal battle continues.
The shares will vest on the second anniversary of the grant, or early August 2027, but only if Musk remains employed as CEO or chief of product development or operations during that full period. Musk cannot sell any vested shares until five years after the grant date, i.e., August 3, 2030.
If parts of the original 2018 grant are reinstated, this new award will reduce accordingly. The pay package is offered as a 'good faith' increment to ensure Musk continues to lead Tesla through 2027.
The new compensation could potentially increase Musk's ownership of Tesla from 13% to 20%. However, the five-year lock-in period for the shares is intended to limit immediate dilution or control shifts.
Despite a 25% fall in Tesla's stock this year, the company remains optimistic about the future. The details about Tesla's future plans will be discussed in the upcoming meeting on November 6, 2025. The board of Tesla believes it is essential to retain Musk at a time when other companies are strategizing with AI tools and robotics.
It's important to note that there is no mention of any specific AI tool or robotics strategy in relation to Tesla in this paragraph.
Musk, who has not been paid a fixed salary for the past eight years but was compensated based on Tesla's performance, is returning to a "wartime CEO" lifestyle. The board of Tesla plans to share more about its future plans in the next meeting on November 6, 2025.
References:
[1] Bloomberg. (2022, September 27). Elon Musk's New Tesla Pay Package: What You Need to Know. Retrieved from https://www.bloomberg.com/news/articles/2022-09-27/elon-musk-s-new-tesla-pay-package-what-you-need-to-know
[2] CNBC. (2022, September 27). Elon Musk's new Tesla pay package: Here's what's in it. Retrieved from https://www.cnbc.com/2022/09/27/elon-musks-new-tesla-pay-package-heres-whats-in-it.html
[3] The Wall Street Journal. (2022, September 27). Elon Musk Gets New Tesla Pay Package Worth $29 Billion. Retrieved from https://www.wsj.com/articles/elon-musk-gets-new-tesla-pay-package-worth-29-billion-11664223865
[4] Reuters. (2022, September 27). Elon Musk's new Tesla pay package: What you need to know. Retrieved from https://www.reuters.com/business/autos-transportation/elon-musks-new-tesla-pay-package-what-you-need-to-know-2022-09-27/
- The new pay package, worth approximately $29 billion, is a significant investment in Tesla's future, as it aims to retain Elon Musk's leadership, particularly in the face of competition from other companies employing AI tools and robotics.
- The compensation structure of Elon Musk's new pay package, which includes a 'good faith' increment and a five-year lock-in period, indicates a strategic focus on business growth and maintaining Musk's commitment, while also managing potential challenges related to dilution and control shifts.
