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After being forced to work at Tesla without any meaningful compensation, which was the aberrant result of an adverse court ruling, Elon Musk has now received a sizable interim compensation award.
For the benefit of those who might not be aware, in January 2024, a Delaware judge voided Elon Musk's $56 billion compensation package from 2018, citing a flawed approval process and excessive influence by Musk over Tesla's board. The ruling also voided Elon Musk's 304 million unexercised stock options, which would have entitled him to around 9 percent of Tesla's 3.2 billion outstanding common shares. Bear in mind the CEO of Tesla currently retains a 13 percent stake in his company.
In June 2024, Tesla shareholders voted to reapprove the 2018 compensation package for Elon Musk, with 77 percent of the total votes polled in favor, aiming to bolster Musk's leadership amid the company's expansion into AI and robotics. The CEO of Tesla had openly demanded a 25 percent voting control over Tesla after the Delaware court ruling, to prevent being "overturned" on occassion.
As part of its relocation of state of incorporation to Texas, Tesla had agreed to retain legal jurisdiction over the issue of Elon Musk's compensation within Delaware and the court of its Chancery Chief Judge, Kathaleen St. J. McCormick.
However, in December 2024, the judge again upheld her initial ruling, stating that the shareholder vote did not rectify the procedural issues. Specifically, the court argued that Tesla and Elon Musk had opted for a re-ratification of the 2018 compensation plan under the section 204 of the Delaware General Corporation Law, which allowed for rectifying corporate acts that were defective due to a "failure of authorization." Critically, the code did not provide for curing breaches of fiduciary duty, which was the entire raison d'être cited by the court for nullifying Musk's 2018 pay package.
This brings us to today when Tesla's board has just approved a new compensation plan for Elon Musk, granting him 96 million restricted shares valued at approximately $29 billion, with an exercise price of $23.34 per share, aligning with the 2018 award's terms. The new award is structured to gradually increase Musk's voting power, reinforcing his commitment to Tesla’s evolving vision.
However, do note that Tesla does not currently think that the performance conditions of this new interim plan will be met anytime soon:
"As of the date of this report, the Company expects that the performance condition of the 2025 CEO Interim Award will not be deemed to be probable of being met. As a result, the Company currently expects that it will not recognize a compensation expense upon the issuance of the award."
This award remains subject to a 2-year vesting period and an antitrust regulatory approval. Elon Musk will have to serve as Tesla's CEO over the vesting period, and retain the ensuing vested shares for a period of 5 years, barring any share disposals to meet tax obligations.
About the author: Writing is my one incontrovertible passion. Over the past six years, he has authored over 2,200 distinct articles on financial and tech-related topics, spanning nearly 1 million words. And he has been a member of Wcctech mobile team since 2025. As an alumnus of the University of Toronto, Rotman Commerce Program, I bring nuance, in-depth knowledge, and a unique perspective to every topic that I cover. When I'm not writing, I'm traveling the world, exploring hidden confectionaries and restaurants as an aspiring food connoisseur.
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