Just six months after a Delaware court struck down his previous compensation deal, Elon Musk has received a new pay package from Tesla worth approximately $29 billion, marking the latest chapter in one of corporate America's most closely watched executive compensation battles.
Tesla announced in a regulatory filing that Musk will receive 96 million shares of restricted stock valued at roughly $29 billion. The structure requires Musk to pay Tesla $23.34 per share of restricted stock that vests, equal to the exercise price per share of the 2018 pay package that was previously invalidated.
This new arrangement comes after Delaware Chancellor Kathaleen McCormick reaffirmed her earlier ruling in December that Tesla must revoke Musk's multibillion-dollar pay package, finding that Musk engineered the landmark pay package in sham negotiations with directors who were not independent.
The controversy stems from Musk's original 2018 compensation package, which carried a potential maximum value of about $56 billion, though that sum fluctuated over the years based on Tesla's stock price. The package was challenged by a Tesla stockholder who argued it was excessive and improperly approved.
McCormick also rejected a massive fee request by plaintiff attorneys, who argued they were entitled to legal fees in the form of Tesla stock valued at more than $5 billion, instead awarding them $345 million.
Musk appealed the order in March, and a month later Tesla created a special committee to look at Musk's compensation as CEO.
The new pay package comes during a particularly challenging period for Tesla. Tesla shares have plunged 25% this year, largely due to blowback over Musk's affiliation with President Donald Trump. The company also faces mounting competitive pressures.
In its most recent quarter, Tesla reported that quarterly profits plunged from $1.39 billion to $409 million, with revenue also falling short of Wall Street expectations. Tesla faces intensifying competition from both the big Detroit automakers and from China.
Investors have grown increasingly worried about the trajectory of the company after Musk spent so much time in Washington this year, becoming one of the most prominent officials in the Trump administration. This concern has been reflected in Tesla's stock performance and shareholder communications.
A group of more than 20 Tesla shareholders wrote to the company expressing concerns about the stock's decline and requesting proper notice of the annual meeting. Under pressure from shareholders, Tesla scheduled an annual shareholders meeting for November to comply with Texas state law.
The approval of this new compensation package represents Tesla's attempt to retain its high-profile CEO while addressing the legal concerns that invalidated the previous deal. However, given the ongoing scrutiny of executive compensation and the company's current performance challenges, this likely won't be the final word on Musk's pay.
The case continues to set precedents for executive compensation practices and corporate governance, with implications extending far beyond Tesla. As the company navigates competitive pressures and regulatory challenges, how this compensation arrangement performs will be closely watched by investors, legal experts, and other corporate boards grappling with similar executive pay decisions.
The timing of this package, coming amid Tesla's operational challenges and Musk's expanded political role, ensures that both the compensation structure and its outcomes will remain under intense public and shareholder scrutiny in the months ahead.