Tesla Approves Musk's $29B Pay Amid Political Risks & Declining Loyalty
Tesla's board has approved a new compensation package for CEO Elon Musk, valued at approximately $29 billion, despite ongoing concerns regarding his political activities and their potential impact on the company. This decision follows a Delaware court's invalidation of a previous $55 billion compensation plan from 2018, which was blocked after shareholders argued the deal was unfairly approved.
The new award grants Musk 96 million restricted Tesla shares, worth about $29 billion at current market prices. For the shares to vest, Musk must remain in a senior leadership role for two years, and he will be required to pay $23.34 per share. Most of the acquired stock must then be held for five years. Notably, should the courts reinstate his original 2018 compensation agreement, this newly approved package would be nullified to prevent double compensation.
In a letter to shareholders, board members Robyn Denholm and Kathleen Wilson-Thompson, who formed the special committee that drafted the package, emphasized the importance of retaining Musk. They stated, "losing Elon would not only mean the loss of his talents but also the loss of a leader who is a magnet for hiring and retaining talent at Tesla."
Musk's original 2018 compensation plan, valued at nearly $56 billion and widely considered the largest in corporate history, faced a significant legal challenge when shareholder Richard Tornetta filed a lawsuit. Tornetta alleged that Musk unduly influenced the board in securing the deal, with his lawyers further contending that Musk intended to use the substantial payout to finance his long-term ambition of colonizing Mars. The case remains entangled in legal proceedings.
The approval of this new package comes at a critical juncture for the electric vehicle manufacturer. Tesla is facing market challenges while pursuing ambitious ventures into robotaxis and humanoid robots. Many investors have expressed worry that Musk's controversial political engagements are detrimental to the company's brand image. Recent data from research firm S&P Global Mobility supports these concerns, showing that Tesla's customer loyalty rate declined from 73% to 57.4% over the past year.
Furthermore, a study published in Nature indicated that Musk's political activities are adversely affecting public perception of Tesla, particularly among U.S. liberals, leading to a broader decline in interest not only in Tesla vehicles but in electric vehicles generally. The research tracked shifts in consumer attitudes following Musk's prominent endorsements of Donald Trump and his involvement with the Department of Government Efficiency (DOGE).
Tesla's recent financial performance has also raised alarms, with the company reporting a 13% year-over-year decline in vehicle sales for the second quarter. Its stock has decreased by 24% since the start of the year.
For months, some investors have publicly urged Musk to disengage from political discourse. Wedbush Securities analyst Dan Ives noted in May that Musk's political activities would have a lasting impact. Ives stated, "The brand damage caused by Musk in the White House/DOGE over the past few months will not go away," adding, "Musk is Tesla and Tesla is Musk." On Monday, Ives further predicted that the approval of the new compensation package signals Musk's continued leadership at Tesla until at least 2030.