Tesla’s Board of Directors has announced an interim compensation package for Elon Musk, titled the “2025 CEO Interim Award.” In a letter to shareholders, a Special Committee of the Board stated that the award is an essential first step to compensate Elon for his work while the 2018 Pay Package remains tied up in Delaware courts.
The package’s goal is to recognize the value that Elon has brought to Tesla, as well as to retain and motivate his leadership as Tesla continues its march down the path of AI and robotics.
The Interim Award
The award, approved unanimously by the board (with Elon and Kimbal Musk having excused themselves), consists of 96 million restricted shares of Tesla stock, which the committee notes is equal to approximately one-third of the compensation from the original 2018 pay package.
The key details of this provision are as follows:
96 million restricted shares of Tesla stock
The shares are subject to Elon paying $23.34 per share, the same split-adjusted price as the 2018 award
Elon is required to serve continuously in a senior leadership role at Tesla for a two-year vesting term
There is a mandatory holding period of five years from the grant date, with the only exceptions being to cover tax payments or the purchase price of the shares
No Double Dipping Clause
The board also included a safeguard to prevent duplicate compensation. The letter states that if the Delaware courts ultimately rule in Tesla’s favor and fully reinstate the 2018 pay package, this new interim award will be forfeited or returned.
“To put it simply, there cannot be any ‘double dip.’”
Elon will not be able to keep both awards - essentially, he is getting a portion of his original award now, and will receive the remaining two-thirds if the Delaware courts rule in Tesla’s favor; otherwise, he keeps this compensation package.
‘A Deal is a Deal’
The Special Committee provided several reasons for issuing this package now. The primary motivation from the Board is to honor the bargain that was struck in 2018, noting that ‘a deal is a deal.’ The letter goes on to state that Elon has already delivered transformative and unprecedented growth for Tesla, which was required to earn the 2018 award, bringing in a $735 billion increase in market capitalization.
Secondly, the board emphasized that retaining and motivating Elon to stay with Tesla is more important than ever before. Tesla is entering a critical stage in its life as it transitions to an AI-first business, and the war for AI talent is spiraling out of control, with billion-dollar pay packages for individual engineers being offered by some companies like Meta.
The award is also designed to address shareholder concerns about energizing and focusing Elon on Tesla - a noted concern we’ve brought up ourselves many times throughout early 2024, where Elon was present, but not necessarily committed to Tesla.
On Elon’s side, this also helps to increase his voting rights, which he has stated is an important incentive for him. He does not wish to be ousted by activist investors just as Tesla perfects AI - it would mean losing control of something that he’s worked his whole life on, as well as losing control of something that could have drastic impacts on human society.
What’s Next?
This interim award is just a first step - it is limited by the capacity of Tesla’s current equity incentive plan. The Special Committee is also working on a longer-term compensation strategy for Elon, which it plans to put to a shareholder vote at the November 6th annual Shareholder Meeting.
