Tesla’s board of directors has decided to award CEO Elon Musk a new compensation package worth $29 billion in shares, effectively sidestepping a US court’s ruling that voided his original 2018 pay deal. The board, acting on a recommendation from a special committee, views this as a “good faith” payment to honor the original agreement. Musk will pay $2 billion to purchase 96 million shares at the 2018 price.
The decision was communicated in a letter to shareholders from board members Robyn Denholm and Kathleen Wilson-Thompson. The letter acknowledged the directors’ awareness of shareholder concerns about Musk’s divided attention, given his many other business ventures and his increasing political involvement. The new stock award, they wrote, is intended to be a “critical first step” toward keeping Musk’s “energies focused on Tesla.”
Musk’s political endorsements and his relationship with Donald Trump have reportedly caused a backlash that has impacted sales and brand loyalty. An S&P Global Mobility survey revealed a sharp decline in customer loyalty, which an analyst called “unprecedented.” The percentage of Tesla owners who bought another Tesla dropped significantly, a trend that highlights the challenges the company faces as a result of its CEO’s public persona.
With the new shares, Musk’s ownership stake in Tesla will increase from 13% to about 15%. This increase in voting power is a key demand from Musk, who has stated that greater control is necessary to prevent being ousted by “activist shareholders.” The board’s letter confirms that the award is designed to gradually increase his influence, securing his commitment as the company shifts its focus toward AI and robotics. The new award is conditional on the original 2018 pay deal not being reinstated.