Tesla gives Elon Musk stock award

‘Moonshot’ award

Tesla investors in 2018 voted to award Musk a “moonshot” package of stock options that vested upon meeting certain milestones. The unprecedented agreement was initially worth $US2.6 billion and spiked to $US56 billion by the time a Delaware court blocked it in early 2024. Plunging and soaring with the company’s fortunes, it has been valued in excess of $US100 billion, according to the Bloomberg Billionaires Index.

That pay package was voided after a shareholder lawsuit. The decision is being appealed, but could still take months to be resolved.

Musk reincorporated the automaker in Texas last year, citing the court decision as part of the reason for leaving Delaware. A special board committee had been exploring ways to offer Musk a new compensation agreement in Texas, which will govern this pay package. The committee consists of two people: Chair Robyn Denholm and board member Kathleen Wilson-Thompson.

Amid the ongoing court fight over Musk’s original pay package, Tesla has taken steps to ward off future legal challenges to attempts to compensate its CEO. In Texas, the business-friendly ethos of Republican leaders has resulted in new regulations and protections for companies based in the state. Among those: a new law that allows businesses to impose limits on which investors can challenge a company’s actions in court.

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In May, Tesla capitalised on the new law and updated its corporate bylaws to require investors to own at least 3 per cent of the company’s shares in order to “institute or maintain a derivative proceeding.”

Inflection point

Since it looked like the legal challenges would drag on, the board said it needed to act to retain Musk “against the backdrop of the ever-intensifying AI talent war and Tesla’s position at a critical inflection point.”

The award requires Musk to serve continuously in a senior leadership role at Tesla during the two-year vesting term and that he hold the shares for five years from the grant date. If the Delaware court fully reinstates the 2018 performance award, Musk will have to forfeit or return the interim award. “To put it simply, there cannot be any ‘double dip,’” the filing said.

The proposal suggests Musk won’t relinquish the CEO title in the near term. He has served as the automaker’s top executive since 2008. Musk told Bloomberg in an interview in May that he’s committed to still being at the helm in five years.

Tesla’s board is sticking with Musk despite his competing priorities. Besides overseeing four other companies, politics has taken up a lot of Musk’s attention this year. His decision to bankroll President Donald Trump’s reelection campaign and lead the DOGE effort to remake the federal government sparked a backlash against the electric vehicle maker.

“While we recognise that Elon’s business ventures, interests and other potential demands on his time and attention are extensive and wide-ranging, including his leadership roles at xAI, SpaceX, Neuralink, X and the Boring Co. as well as his other interests, we are confident that this award will incentivise Elon to remain at Tesla,” the board said in its letter. “To be clear, losing Elon would not only mean the loss of his talents but also the loss of a leader who is a magnet for hiring and retaining talent at Tesla.”

Tesla has seen an exodus of notable workers in recent months. Omead Afshar, a longtime Musk confidant who oversaw sales and manufacturing operations in North America and Europe, and Jenna Ferrua in human resources both exited, Bloomberg reported in June. Milan Kovac, head of engineering for the Optimus humanoid robot program, stepped down citing a desire to spend more time with his family. David Lau, vice president of software engineering, departed earlier in the year.

Late May marked Musk’s last official day as a special government employee, and he committed to spending more time at Tesla. But just days later, he engaged in a bitter public falling out with Trump that led to the president threatening to cancel his companies’ federal contracts. Musk has since said he regretted some of his comments. He’s also said he will form a new political party.

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Tesla recaptured some momentum in the middle of the year after rolling out its long-promised driverless-taxi service that Musk sees as an important part of its future business. The company launched June 22 with a handful of robotaxis in Austin and has been working to expand.

Last month, Tesla reported another big drop in quarterly sales, setting it up for a full-year decline. Musk at the time warned that the automaker faced potentially “a few rough quarters” ahead.