Tesla has recently announced a groundbreaking move to retain CEO Elon Musk by rewarding him with a massive restricted stock package worth around $29 billion. This decision comes after Musk’s previous pay package was rejected by a Delaware Chancery Court in 2018, leading him to question his future at the company.
The Special Committee of the Tesla Board, comprised of Board Chair Robyn Denholm and board member Kathleen Wilson-Thompson, unanimously approved this recommendation to compensate Musk for his exceptional contributions over the past seven years. The package aims to reward Musk for leading various successful Tesla projects that have generated significant value for shareholders.
The award includes 96 million restricted shares of stock, subject to a two-year vesting term and a purchase price equal to the split-adjusted exercise price of the stock options awarded to Musk under the 2018 CEO Performance Award. It also requires Musk to serve continuously in a senior leadership role at Tesla during the vesting term and includes a pledging allowance for tax payments or the purchase price. Additionally, there is a mandatory holding period of five years from the grant date, except for covering tax payments or the purchase price.
The board emphasized that there cannot be any “double dip” if the Delaware courts fully reinstate the 2018 CEO Performance Award. Musk will not be able to keep this new award in addition to the options awarded under the 2018 CEO Performance Award if the courts rule in Tesla’s favor. Musk and his brother, Kimbal, who are both members of the Tesla board, recused themselves from voting on this pay package.
This move is crucial as Musk has expressed concerns about his control of the company, with his current stake in Tesla standing at about 12.8 percent. He has mentioned his desire for a 25 percent stake to protect himself against activist shareholders. The pay package should alleviate any worries about losing Musk as CEO and ensure consistent progress on various fronts, including AI and Robotics.
Overall, Tesla’s decision to reward Musk with a significant stock package demonstrates their commitment to retaining a visionary leader who has played a pivotal role in the company’s success. This move not only acknowledges Musk’s extraordinary contributions but also secures his continued leadership for the foreseeable future.