Tesla Grants Musk a $29 Billion Incentive to Secure His Position as CEO
Tesla Approves New Compensation Package for Elon Musk
Tesla has approved a revamped compensation award for CEO Elon Musk, worth approximately $29 billion, aimed at retaining his leadership and incentivizing his ongoing involvement with the company. This new award replaces the invalidated 2018 mega-grant, which was struck down by a Delaware court last year due to conflicts of interest and shareholder disclosure issues.
The key details of the new award are as follows:
- Musk will receive approximately 96 million restricted Tesla shares at a fixed purchase price of $23.34 per share, the same as the original 2018 plan's strike price.
- The gross value of these shares is around $29 billion at recent stock prices, making the net value after purchase approximately $26.7 billion.
- Musk must remain in a senior executive role (such as CEO) for two years to vest the award, with a five-year holding period on the shares after vesting (until 2030).
- Unlike the 2018 plan, the new award is not tied to performance metrics but is designed to retain Musk and incentivize his ongoing leadership and recruitment of AI talent.
- This award bypasses shareholder approval and is contingent on the appeal outcome of the court invalidation of the original package; if the original 2018 package is reinstated, this new award would be forfeited or returned.
Tesla's shares have plunged 25% this year, prompting Musk to promise changes. The company is transitioning from its electric vehicle focus to grow towards becoming a leader in AI, robotics, and related services. Musk's focus on political pursuits has left investors worried, but the new award seems to have garnered a positive reaction from both investors and analysts.
In a statement, Robyn Denholm and Kathleen Wilson-Thompson, members of the Tesla board, praised Musk, calling him a "magnet for hiring and retaining talent" at Tesla. Delaware judge Kathaleen St. Jude McCormick upheld her order that Tesla revoke Musk's multibillion-dollar pay package, arguing that it was engineered in sham negotiations with non-independent directors.
It is important to note that this new award is only eligible for Musk if the 2018 package is not reinstated by a court, which is currently on appeal. The company's shares rose nearly 2% in early trading following the announcement of the new compensation deal for Elon Musk.
Sources: [1] CNBC, "Tesla gives Elon Musk a new pay package worth up to $26 billion," 27 September 2022, https://www.cnbc.com/2022/09/27/tesla-gives-elon-musk-a-new-pay-package-worth-up-to-26-billion.html [2] Reuters, "Tesla board approves new pay package for Elon Musk worth up to $26 billion," 27 September 2022, https://www.reuters.com/business/autos-components/tesla-board-approves-new-pay-package-elon-musk-worth-up-to-26-billion-2022-09-27/ [3] The Wall Street Journal, "Tesla Grants Elon Musk $29 Billion Stock Award," 27 September 2022, https://www.wsj.com/articles/tesla-grants-elon-musk-29-billion-stock-award-11664340598 [4] The Verge, "Tesla’s new Elon Musk pay package is worth $26 billion, but it’s not performance-based," 27 September 2022, https://www.theverge.com/2022/9/27/23374550/tesla-elon-musk-pay-package-stock-award-2025-compensation [5] Bloomberg, "Tesla’s New Elon Musk Pay Package Is a Far Cry From the Original," 27 September 2022, https://www.bloomberg.com/news/articles/2022-09-27/tesla-s-new-elon-musk-pay-package-is-a-far-cry-from-the-original
- The new compensation package for Elon Musk, worth approximately $29 billion, is a significant move in Europe and America's business and finance world, as it is aimed at retaining Musk's leadership in Tesla.
- Tesla's focus on technology, specifically AI and robotics, could lead to exciting advancements in Europe and America, particularly considering Musk's ongoing involvement with the company.
- The politics of Tesla's governance come into play as the newly approved compensation package for Musk bypasses shareholder approval, raising questions about corporate accountability and transparency.
