Tesla’s board of directors has approved a new $29 billion stock award for CEO Elon Musk, a move that comes after a US court invalidated his previous compensation package. The decision was made with shareholder feedback in mind, according to a letter from board members Robyn Denholm and Kathleen Wilson-Thompson, who acknowledged concerns about Musk’s divided attention. The award, they wrote, is intended to “keep Elon’s energies focused on Tesla.” Musk will pay $2 billion to buy 96 million shares at the 2018 price.
The board’s special committee recommended the award as a “good faith” effort to “honour the bargain that was struck in 2018.” This new package is a direct response to the court ruling that rescinded the original $56 billion deal. The directors’ letter highlights their belief that this new compensation is essential to recognize Musk’s contributions and secure his future commitment to the company.
Musk’s extensive involvement in other ventures, like SpaceX and X, along with his public political endorsements, has been a source of anxiety for many investors. An S&P Global Mobility survey revealed a sharp and “unprecedented” decline in customer loyalty, with the percentage of Tesla owners purchasing another Tesla falling significantly. This decline underscores the challenges the company faces as a result of its CEO’s public persona.
The new shares will increase Musk’s ownership stake from 13% to about 15%, giving him more voting power. This is a crucial element for Musk, who has said he needs more control to prevent activist shareholders from ousting him, particularly as the company shifts its focus to AI and robotics. The board’s letter confirms that the award is designed to gradually increase his influence, ensuring his long-term leadership. This new package will be forfeited if the original 2018 pay deal is reinstated.