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Tesla revealed on Monday an “interim” compensation package valued at approximately $29 billion for Elon Musk, stressing the importance of retaining the contentious CEO during a time of intense competition for top talent.
This announcement comes as Tesla appeals a Delaware court decision that invalidated a 2018 compensation package estimated at $55.8 billion. With the appeal process ongoing, Monday’s announcement serves as a temporary measure while the company formulates a “long-term CEO compensation strategy,” as stated in a letter to shareholders.
The decision occurs in the wake of a competitive struggle for leading engineering talent, as firms such as Google and Meta vie for authority in artificial intelligence.
The letter from Tesla, signed by board members Robyn Denholm and Kathleen Wilson-Thompson, described Musk as a “magnet for hiring and retaining talent at Tesla,” highlighting the company’s shift from solely electric vehicles to aspiring for leadership in AI, robotics, and related fields.
“We have recommended this award as a first step, ‘good faith’ payment,” said the letter. “Retaining Elon is more important than ever before.”
In the business community, Musk is considered an exceptional talent due to his achievements in transforming Tesla and SpaceX into prominent global enterprises. However, his leadership at Tesla has faced increased scrutiny over the past year as car sales and profits have declined.
This decline has been attributed in part to Musk’s backing of far-right political movements, as well as the slow introduction of new vehicle models following the polarising performance of the Cybertruck.
During a Tesla earnings call on July 23, Musk cautioned that more potentially “rough” quarters may be forthcoming before the company’s robotics and AI initiatives start generating returns.
On that call, Musk reiterated his worries regarding the current structure in which he owns approximately 13 per cent of Tesla shares before Monday’s award. Tesla’s statement did not specifically reference Musk’s political involvement, which has led to consumer boycotts and vandalism. Nevertheless, the letter from Denholm and Wilson-Thompson hinted at worries that Musk’s focus had strayed from the company, labelling the interim package a measure to “keep Elon’s energies focused on Tesla.”
“As I’ve mentioned before, I think my control over Tesla should be enough to ensure that it goes in a good direction, but not so much control that I can’t be thrown out if I go crazy,” Musk said.
The substantial compensation package materialised eight months after a Delaware judge dismissed Musk’s previously larger compensation claim at Tesla, denying his request to reinstate the pay deal through a shareholder vote.
Musk would be obligated to relinquish the new compensation package if the appeals court rules in his favour and awards him the entire 2018 compensation, which was initially valued at $55.8 billion. The latest payout is likely to reignite concerns regarding Musk’s compensation, given that he is already the world’s wealthiest individual, and whether Tesla’s board is providing adequate oversight of its CEO.
Tesla shares increased by 2.4 per cent in early trading on Monday.
