Tesla grants CEO Elon Musk billions worth of shares, but with a condition attached
Tesla's Controversial CEO Pay Package Remains a Legal Battleground
The compensation package given to Elon Musk, CEO of Tesla, in 2018 has been a subject of controversy and a prolonged legal battle. Initially approved by Tesla's board and shareholders, the $56 billion pay package, primarily consisting of stock options, has been challenged and voided by Delaware courts.
January 2018: Tesla's board and shareholders agreed to a 10-year performance-based compensation plan for Musk, with a potential value of $56 billion through stock options.
February 2019: Shareholders filed a lawsuit in Delaware, alleging the approval process was flawed due to Musk's substantial influence in negotiating terms with himself.
April 2022 & February 2024: Delaware Chancery Court Judge Kathaleen McCormick ruled against Musk, finding the plan improperly approved by a not sufficiently independent board and withheld key information from shareholders. The court formally ordered the cancellation of the $56 billion plan.
June 2024: Despite the court ruling, Tesla shareholders voted to reaffirm Musk’s compensation plan and approved Tesla’s reincorporation in Texas to avoid Delaware courts.
March 2025: Musk appealed to the Delaware Supreme Court, arguing legal errors were made when voiding the compensation plan. The Supreme Court has yet to review the appeal.
In response to the legal uncertainties, Tesla's board approved an interim compensation package valued at approximately $26-29 billion to retain Musk. This interim plan grants him 96 million restricted Tesla shares purchasable at $23.34 per share, the same price as the voided plan. This interim plan vests over two years and is void if the original $56 billion plan is reinstated by the courts.
Tesla board members emphasize that the interim award is to retain Musk amid legal uncertainties and recognise his key role in Tesla’s growth, despite the unresolved legal status of the original pay package.
The ongoing legal battle centres on whether Musk’s original $56 billion compensation plan was validly approved. Courts have so far ruled it was not, Tesla created a large interim pay package to retain him, and Musk is appealing to restore the original deal.
[1] TeslaWorth
[2] NYTimes
[3] Bloomberg
[4] Reuters
[5] CNN Business
- TeslaWorth or CNN Business might cover the story of Tesla's business finances, delving into the controversies surrounding Elon Musk's compensation package, which stands at approximately $26-29 billion in the interim.
- Bloomberg or NYTimes technology sections could report on the impact of technology on Tesla's compensation situation, discussing the influence of Musk's technological prowess in the company and the legal ramifications of his performance-based pay package.
