Elon Musk’s $29 Billion Pay Package Approved by Tesla Board, Securing CEO Role
The CEO receives 96 million shares for his 'extraordinary' work but faces a significant holding period before he can cash in, a move designed to ensure his long-term focus on the company.
Shares of Tesla Inc. (TSLA) saw a boost on Monday after the company’s board of directors officially approved a landmark pay package for Chief Executive Elon Musk, valued at approximately $29 billion in stock. The decision, which follows an overwhelming shareholder approval vote in June 2024, is seen by investors as a critical move to secure Musk’s leadership for the foreseeable future.
The market reacted positively to the news, with Tesla’s stock climbing as much as 3.1% during intraday trading before settling at a 1.2% gain. This reversed a four-day losing streak and signaled investor confidence in the board’s strategy. According to Wedbush analyst Dan Ives, the enthusiasm stems from the structure of the award, which incentivizes Musk to remain at the helm for at least the next five years.
“This was a strategic move by the Board to solidify Musk as CEO of Tesla over the coming years,” Ives noted, explaining that the package was meant to “ensure Musk would commit to Tesla… with some general guardrails put in place to keep [Tesla’s] most important asset.”
Breaking Down the $29 Billion Award
The compensation package, initially established in 2018 but delayed by legal challenges, grants Musk 96 million shares of Tesla common stock. Based on Friday’s closing price of $302.63, the award is worth $29.05 billion.
Key details of the award include:
Vesting Date: The shares will vest on August 3, 2027, provided Musk continues in an executive role at Tesla until that time.
Holding Period: Musk will not be permitted to sell any of these vested shares until August 3, 2030.
Cost to Musk: He is required to pay Tesla $23.34 per share upon vesting.
Once the award vests, Musk’s total holdings in the company will rise to 506,794,076 shares, carrying a current valuation of over $153 billion. Ives highlighted that the resulting increase in Musk’s voting rights was a crucial element, removing a “major overhang on the story” by incentivizing him to stay focused on Tesla.
Board Cites ‘Extraordinary’ Leadership Amid Challenges
In a letter to shareholders, the board committee emphasized that Musk had not received “meaningful” compensation for eight years due to the holdups. They praised the “extraordinary” return he has generated for shareholders and his visionary leadership.
“Through Elon’s unique vision and leadership, Tesla is transitioning… to grow towards becoming a leader in [artificial intelligence], robotics and related services,” the letter stated. “To succeed, it requires a leader who combines strategic foresight, adaptability, and relentless execution.”
However, the celebratory news was tempered by concerns over the company’s performance in a key market. Data from the China Passenger Car Association revealed that Tesla sold 67,886 vehicles in China in July, an 8.4% decrease from the previous year. This decline is particularly notable as it occurred while China’s overall market for new energy vehicles grew by 25%, causing Tesla to slip from second to fourth place in the country’s sales rankings.
Despite this headwind, the board’s decision solidifies the position of a leader they, and many investors, deem indispensable. Even before this new award, Elon Musk was already the world’s richest person, with a net worth of $352 billion, according to the Bloomberg Billionaires Index.
