In a direct response to a US court voiding his 2018 pay package, Tesla’s board has awarded Elon Musk a new $29 billion stock grant. The move, characterized as a “good faith” payment, aims to recreate the terms of the original deal, which was worth $56 billion at the time. Musk will pay a nominal $2 billion to acquire 96 million shares at the 2018 price, a compensation structure that has been criticized by some as overly generous.
The decision was spearheaded by a special committee of the board and communicated to shareholders via a letter from chair Robyn Denholm and director Kathleen Wilson-Thompson. The letter made it clear that the board views this award as a way to “honour the bargain that was struck in 2018” and ensure Musk’s continued commitment to the company. The directors also conceded that they are aware of shareholder concerns about Musk’s numerous ventures and political entanglements, which have led to fears of his divided focus.
Musk’s political activities, particularly his support for Donald Trump, have been a source of controversy and have reportedly had a negative impact on Tesla’s brand image and sales. A recent survey from S&P Global Mobility showed a sharp decline in customer loyalty, with the percentage of Tesla owners purchasing another Tesla dropping significantly. While competition in the electric vehicle market is also a factor, this unprecedented decline in loyalty highlights the challenges the company faces.
The new shares will increase Musk’s ownership stake to about 15%, up from 13%. This boost in voting power is crucial for Musk, who has expressed a desire for greater control to protect the company from activist shareholders. The board supports this view, stating that the award is designed to gradually increase his influence, ensuring his focus as Tesla transitions into an AI and robotics firm. This new package is contingent on the original 2018 award not being reinstated.
