Tesla to reconsider Elon Musk compensation after Delaware court struck down $56B pay package
Tesla’s board has reportedly formed a special committee to reconsider CEO Elon Musk’s pay, potentially setting the stage for a new compensation package as the company faces mounting legal and investor pressure.
The move comes in response to a Delaware court decision that invalidated Musk’s historic $56 billion stock award from 2018.
The committee consists of Tesla chair Robyn Denholm and board member Kathleen Wilson-Thompson, who are now tasked with weighing both alternative forms of compensation and the legal path forward, according to Financial Times.
People familiar with the matter told FT that the committee is still in early deliberations and has yet to finalize a structure or recommendation.
Any new stock award would be tied to future performance targets.
Tesla has not commented on the discussions.
The company’s previous award to Musk included 304 million stock options, valued at $56 billion at the time of the Delaware ruling in early 2024.
Those options peaked at $146 billion in December and currently stand at an estimated $98 billion, based on Tesla’s share price.
Musk earned the right to exercise the options after meeting ambitious growth benchmarks by 2023.
The 2018 package was struck down in January by Delaware Chancellor Kathaleen McCormick, who ruled that Tesla’s board had not acted independently and had instead operated “like supine servants of an overweening master.”
McCormick also dismissed a subsequent shareholder vote to reinstate the award.
Should Tesla succeed in appealing the decision to the Delaware Supreme Court, Musk’s ownership stake could grow from just under 13% to more than 20%.
Musk has warned he may leave Tesla unless granted greater control. In early 2024, he said he couldn’t protect the company from activist investors or steer its AI strategy responsibly without a larger stake.
To address investor concerns after a 32% stock decline since December, Musk recently pledged to “devote far more of my time to Tesla.”
The company has denied reports that it is considering replacing him as CEO.
Any new equity award for Musk could trigger significant financial implications.
Reissuing options would come with a $50 billion-plus accounting charge and expose Musk to a 57% tax rate, since the options would now be considered “in the money.”
Tesla’s board itself has come under scrutiny. In January, several directors agreed to return over $900 million in cash and stock to resolve a lawsuit challenging their compensation.
Denholm has sold $538 million worth of Tesla stock since 2014 — including $198 million in the past six months.
Wilson-Thompson, a former Walgreens Boots Alliance executive, has previously reviewed Musk’s compensation, serving as the sole member of a prior committee due to other board members’ close ties to the CEO.
Tesla’s annual shareholder meeting may be delayed this year as the board continues to explore its options. The company traditionally holds the event in May or June.