Tesla Awards Elon Musk $29 Billion Stock Package to Ensure CEO’s Loyalty

Tesla’s board has approved a new $29 billion compensation package for CEO Elon Musk, granting him 96 million restricted shares in a bid to retain his leadership during the company’s pivot from electric vehicles to AI-driven robotics and robotaxis. The award, described as an “interim” measure, follows a Delaware court’s rejection of Musk’s 2018 pay package valued at $56 billion, which was voided due to flawed board negotiations and inadequate shareholder disclosure.

A Deal Forged in Legal Uncertainty

The new shares vest only if Musk remains Tesla’s CEO or in another “key executive role” for two years and if courts do not reinstate his 2018 package, which is under appeal. Should the original award be upheld, Musk must forfeit the new shares to prevent “double-dipping.” He can purchase the shares at $23.34 each, the same price as the 2018 options, locking in nearly $280 per share in built-in value based on Tesla’s current $300+ stock price. The grant boosts Musk’s stake from 12.7% to 15%, addressing his demand for greater voting control to advance Tesla’s AI ambitions.

Board’s Defense: Talent Retention Amid Turbulence

In a shareholder letter, board members Robyn Denholm and Kathleen Wilson-Thompson justified the award as critical for retaining Musk’s “extraordinary talent” amid Tesla’s strategic transition. They emphasized Musk’s eight years without “meaningful compensation” and framed the grant as honoring the original 2018 bargain, which catalyzed Tesla’s 2,000% stock surge over the past decade. The board also cited intensifying competition for AI engineers, where “nine-figure cash packages” have become commonplace.

Investor Backlash and Legal Safeguards

The package drew sharp criticism from institutional investors. New York City Comptroller Brad Lander branded it “obscene,” noting Tesla’s 25% stock decline this year and Musk’s political distractions, including his role as a Trump administration advisor and founder of a new political party. Tesla preemptively shielded the award from legal challenges by relocating its incorporation to Texas and adopting a bylaw requiring plaintiffs to hold 3% of Tesla stock (worth ~$3 billion) to sue, a move experts say favors the company under Texas’s business-friendly laws.

Why Now? Pivot and Pressure

Tesla faces slumping sales, with revenue dropping 16% year-over-year in Q2 2025 amid aging models and Musk’s polarizing politics. S&P Global Mobility data shows Tesla’s brand loyalty plummeted from 73% to 49.9% after Musk endorsed Donald Trump, though it partially recovered to 57.4% recently. Wedbush analyst Dan Ives called the grant a necessary step to secure Musk’s focus: “Musk remains Tesla’s big asset, and this removes an overhang on the stock”.

Expert Skepticism

Compensation experts lambasted the structure. Cornell’s Brian Dunn likened it to a “fog-the-mirror grant” requiring no performance hurdles beyond Musk’s continued presence. Lawrence Fossi, a Tesla critic, warned of “ferocious” accounting charges if the award vests, while governance scholar Charles Elson argued, “You don’t have to incentivize him to stay. If he leaves, he throws away 13% of the company”.

What’s Next

Tesla will propose a longer-term compensation plan at its November 6 shareholder meeting. For now, the board’s gamble underscores a stark reality: Tesla’s future hinges on Musk’s leadership, even at a $29 billion price tag.

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