Tesla’s board of directors has approved a new $29 billion share award for CEO Elon Musk, effectively re-establishing the terms of his 2018 pay package after a US court rescinded the original deal. The move is a “good faith” effort to “honour the bargain that was struck in 2018,” according to a letter from board members Robyn Denholm and Kathleen Wilson-Thompson. Musk will pay $2 billion for 96 million shares at the 2018 price, a fraction of their current value.
The special committee of the board that recommended the award acknowledged the widespread concerns among shareholders about Musk’s attention being diverted by his other ventures, such as SpaceX and X. The directors stated that the new package is a “critical first step” toward keeping Musk’s “energies focused on Tesla.” They hope this financial incentive will secure his long-term commitment to the company, particularly as it moves toward a future centered on AI and robotics.
Musk’s political leanings and support for Donald Trump have reportedly caused a backlash, impacting the company’s brand and sales. A recent S&P Global Mobility survey highlighted an “unprecedented” drop in customer loyalty, a trend that began after Musk’s political actions became more prominent. The percentage of Tesla owners who bought another Tesla fell dramatically before a slight recovery, indicating that these external factors are having a significant effect on the business.
This new award will increase Musk’s stake in the company from 13% to approximately 15%, giving him greater voting power. This is a key demand from Musk, who has said he needs more control to prevent being ousted by activist shareholders as the company shifts its focus away from traditional car manufacturing. The board’s letter notes that the award is designed to gradually increase his voting power, cementing his leadership. This new package will be forfeited if the original 2018 pay deal is reinstated.