Tesla board approves $29 billion compensation for Elon Musk

Tesla’s Board of Directors approved a staggering compensation package for CEO Elon Musk, granting him 96 million shares of restricted stock valued at approximately $29 billion.

This interim award, announced as a “good faith” measure on August 3, 2025, aims to secure Musk’s leadership as Tesla navigates a critical pivot toward artificial intelligence (AI), robotics, and autonomous vehicles.

Legal battles

The decision comes amid ongoing legal battles over Musk’s previous $56 billion compensation package, struck down by a Delaware judge in 2024 for procedural flaws.

The backstory: A legal and corporate saga

In 2018, Tesla shareholders approved a performance-based compensation plan for Musk, valued at up to $56 billion, tied to ambitious milestones like increasing Tesla’s market capitalization to $650 billion.

The package, unprecedented in scale, aimed to align Musk’s incentives with Tesla’s growth, forgoing a traditional salary for stock options.

By 2024, Tesla’s market cap exceeded $1 trillion, and Musk met all targets, but a Delaware Court of Chancery ruling voided the plan.

Chancellor Kathaleen McCormick deemed the approval process “deeply flawed,” citing Musk’s undue influence over a non-independent board and inadequate shareholder disclosures.

Tesla's appeal

Musk and Tesla appealed, arguing the ruling contradicted shareholder will, as 73% approved the package in 2018 and 72% reaffirmed it in a 2024 revote.

However, McCormick upheld her decision in December 2024, stating that a shareholder vote couldn’t rectify a “conflicted-controller transaction.”

Facing this setback, Tesla’s board, led by a special committee, crafted the new $29 billion package, equivalent to one-third of the 2018 award, to retain Musk while litigation continues.

The new compensation package

The 2025 award grants Musk 96 million shares at $23.34 each, vesting over two years if Musk remains CEO or an executive overseeing product development or operations.

A five-year holding requirement ensures long-term commitment, and provisions prevent “double dipping” if the 2018 award is reinstated.

The board emphasized Musk’s “extraordinary work,” noting he hasn’t received meaningful compensation since 2017.

The package aims to boost Musk’s voting power, currently at 13%, to keep him focused on Tesla amid his ventures in xAI, SpaceX, Neuralink, and X Corp.

Tesla’s stock rose 2.6% in premarket trading post-announcement, reflecting investor confidence in Musk’s leadership.