“Simply put, retaining and incentivizing Elon is fundamental to Tesla achieving these goals and becoming the most valuable company in history,” Tesla said in a shareholder letter signed by Chair Robyn Denholm and director Kathleen Wilson-Thompson.
Musk, 54, has previously urged the board to arrange a new compensation package for him, suggesting he would pursue artificial intelligence and robotics products elsewhere if he didn’t have roughly 25% voting control at Tesla. While Musk remains Tesla’s largest shareholder, he sold a significant portion of his stock to fund his acquisition of Twitter. The social-media platform, which he renamed X, was acquired by Musk’s xAI earlier this year.
Tesla shares rose 1.9% as of 7:19 a.m. Friday in New York. The stock has fallen 16% this year.
A market capitalization of $8.5 trillion would be more than double that of Nvidia Corp., currently the world’s most valuable company. Tesla’s value peaked in late 2024 at about $1.5 trillion.
The value of the latest CEO award, at $87.8 billion in the filing, would swell to about $1 trillion if Musk hits all the performance targets and gets to collect all the restricted shares. The proxy also outlines that Musk must participate in the board’s development of a framework for long-term CEO succession in order to earn either of the last two tranches of the performance award.
“Simply put, retaining and incentivizing Elon is fundamental to Tesla achieving these goals and becoming the most valuable company in history,” Tesla said in a shareholder letter signed by Chair Robyn Denholm and director Kathleen Wilson-Thompson.
Musk, 54, has previously urged the board to arrange a new compensation package for him, suggesting he would pursue artificial intelligence and robotics products elsewhere if he didn’t have roughly 25% voting control at Tesla. While Musk remains Tesla’s largest shareholder, he sold a significant portion of his stock to fund his acquisition of Twitter. The social-media platform, which he renamed X, was acquired by Musk’s xAI earlier this year.
Tesla’s board is sticking with Musk despite his competing priorities. Besides overseeing other companies, his attention has increasingly turned to politics. He was President Donald Trump’s biggest financial backer in last year’s election and briefly led efforts to remake the federal government. This sparked a backlash against Tesla that included sporadic cases of arson and vandalism at stores and charging stations.
The blowback contributed to a volatile first half, with Tesla reporting two of its worst quarters in years and a 13% decline in worldwide vehicle deliveries.
Late May marked Musk’s last official day as a special government employee, and he committed to spending more time at Tesla. Only days later, he and Trump had a bitter falling-out.
Tesla regained some momentum the last few months, rolling out its long-promised driverless-taxi service that Musk sees as an important part of its future business. The company launched June 22 with a handful of robotaxis in Austin.
The board in Friday’s filing acknowledged that “Musk’s high public profile attracts significant scrutiny, and that some have questioned whether his personal views or outside activities might be a distraction from his leadership of Tesla. While media coverage often emphasizes these concerns, our direct experience with Musk does not support that characterization.”
Under the new plan, Musk must remain at Tesla as either CEO or executive officer responsible for product or operations in order to receive the shares, which are divided into 12 tranches. To receive them, Musk has to hit 12 market capitalization milestones matched with 12 operational milestones, such as delivery of 1 million Optimus robots and 20 million Tesla vehicles, having 1 million robotaxis in commercial operation, and growing adjusted Ebitda to $400 billion.
Tesla investors in 2018 voted to award Musk a package of stock options that vested upon meeting certain milestones widely viewed at the time as moonshots. The options initially had a fair value of about $2.6 billion and were worth around $56 billion once Tesla achieved the final milestone. The value of the options rise and fall based on the company’s share price and at times have been worth over $100 billion, according to the Bloomberg Billionaires Index.
The award was challenged by a shareholder who argued that Tesla’s directors didn’t make proper disclosures about the package and the performance benchmarks. Delaware Chancery Court Chief Judge Kathaleen St. J. McCormick agreed, finding that Musk had undue influence over the process and that the board, which includes his longtime friends and associates, was rife with conflicts of interest.
Tesla has appealed that decision to the Delaware Supreme Court, which has scheduled oral arguments for Oct. 15. Shareholders voted last year to re-ratify the prior package, part of a symbolic effort to bolster Musk’s legal case. Musk later cited the pay dispute as part of the reason that Tesla shifted its corporate home to Texas from Delaware.
Tesla revealed on May 16 that it had changed its corporate bylaws to require investors to own at least 3% of the company’s shares before filing a lawsuit, likely preventing future challenges over compensation.
