Tesla Awards Elon Musk $29 Billion Compensation Package Amid ‘AI Talent Battle’

Tesla’s board has introduced a new compensation package for CEO Elon Musk, valued at around $29 billion in shares, pointing to the “growing AI talent competition and Tesla’s pivotal role” as primary reasons for this payment.

This substantial compensation is part of a 2019 Equity Incentive Plan that has already received shareholder approval, which means it will not need a vote, according to a regulatory filing and Ann Lipton, a professor at the University of Colorado Law School. Tesla intends to present “a long-term CEO compensation strategy” at its annual shareholder meeting scheduled for November.

Musk’s new payment plan could be invalidated if the Delaware Supreme Court decides to overturn a January 2024 ruling that struck down his 2018 compensation package, which was negotiated privately. That package was valued at approximately $56 billion.

Musk has suggested he may stop his work on AI and robotics at Tesla if he does not gain more control over the company. These statements emerged just before a high-stakes competition for talent in the AI industry, alongside an increase in mergers and acquisitions.

Simultaneously, Musk has founded his own AI company outside Tesla, named xAI, which now owns X, his social media platform. This development has taken place while Tesla’s sales growth has slowed and the brand’s image has suffered due to Musk’s ties with the Trump administration.

On Monday, Tesla revealed that its board had formed a special committee earlier this year, led by chairwoman Robyn Denholm and board member Kathleen Wilson-Thompson, to create a new compensation package.

The approved compensation entails granting Musk 96 million shares that will vest in two years, contingent upon his “continuous service in a senior leadership position at Tesla” during that time and retaining the shares for five years. Unlike Tesla’s previous award to Musk, this new agreement does not seem tied to specific objectives like enhancing the company’s stock price.

At the current premarket trading price for Tesla, this would amount to about $29 billion. Musk will need to pay $23.34 per share, bringing the estimated value of the award to roughly $26.7 billion. Depending on the Delaware Supreme Court’s ruling on Tesla’s appeal, the package may be forfeited to prevent “double dipping,” as per Tesla’s statement.

“Elon will not be able to keep this new award in addition to the options he will receive under the 2018 CEO Performance Award if the courts rule in our favor,” the company remarked.

Tesla mentioned that Musk and his brother Kimbal, who is also on the board, recused themselves from the discussions regarding this new compensation package. Musk’s involvement in the 2018 compensation package was a significant factor in Judge Kathaleen McCormick’s decision to annul it following a shareholder lawsuit trial.

McCormick noted that the process for creating the 2018 plan was “deeply flawed” due to Musk’s influence and his close associations with board members. She also criticized that plan for lacking terms to bind Musk to Tesla for “any specific duration”—which likely accounts for the two-year commitment included in the new proposal.

McCormick’s ruling led to substantial backlash among Tesla’s most passionate supporters and many shareholders. It also prompted the company to re-incorporate from Delaware to Texas, a state with fewer shareholder protections. Tesla even held a shareholder vote to “re-affirm” the compensation package. However, McCormick upheld her decision in December 2024, stating that the vote and Tesla’s legal arguments represented “unprecedented theories [that] contradict multiple established laws.”

Update: This story and the headline have been modified to clarify that the award has been endorsed by Tesla’s board and does not necessitate a shareholder vote.