Tesla is now reconsidering how it compensates its CEO Elon Musk, after a Delaware court struck down his massive 2018 stock-based pay package, originally valued at $56 billion.
That decision, which ruled the award was unfairly approved by a board too close to Musk, has forced the electric carmaker to regroup amid investor tension and legal setbacks.
A special committee formed by Tesla’s board—made up of Chair Robyn Denholm and director Kathleen Wilson-Thompson—is now exploring how to move forward. They’re tasked with crafting a possible new pay deal for Musk that would tie any compensation to performance benchmarks, much like the structure of the original plan. Discussions are still in the early stages, and no final decisions have been made.
The ruling that invalidated Musk’s package, issued in January 2024, didn’t just cancel the deal—it criticized the board for failing to act independently, accusing them of yielding to Musk’s influence. The original package awarded Musk over 300 million stock options in return for reaching bold company targets. At its peak, the award had ballooned to $146 billion before sliding back to about $98 billion, reflecting Tesla’s declining stock price in recent months.
Musk had warned he might step away from Tesla if not granted a larger ownership share, arguing that more control is necessary to lead the company through its next phase—particularly in areas like artificial intelligence and robotics. At the time of the court decision, Musk held just under 13 percent of Tesla shares. If his original stock options were reinstated, that stake could rise above 20 percent.
In the meantime, Tesla shares have dropped significantly—down 32 percent since December—prompting further concern among shareholders. Musk has responded by promising to commit more time to Tesla, amid reports that his attention had shifted heavily toward other ventures like X (formerly Twitter) and SpaceX.
Any attempt to issue a new compensation package would bring financial complications. Reissuing stock options could result in a $50 billion-plus accounting cost for Tesla, while exposing Musk to a steep tax rate since the options are now considered profitable if exercised.
The board is also under pressure. Earlier this year, several Tesla directors agreed to return more than $900 million in stock and cash following a lawsuit that challenged their pay. Denholm, who leads the current review, has sold over half a billion dollars worth of Tesla stock since 2014—including nearly $200 million in just the last six months.
Wilson-Thompson, a seasoned corporate executive, has previously overseen Musk’s pay discussions as the only board member deemed independent enough to do so.
As legal efforts continue—Tesla may appeal the Delaware ruling—the company’s annual shareholder meeting could face delays. Traditionally held in late spring, the event may now be postponed as the board works through one of the most complex executive pay challenges in corporate history. Investors, already wary of Tesla’s market position and leadership tensions, are watching closely for what comes next.