Tesla asks shareholders to approve $29B comp package for Elon Musk amid ‘AI talent war’

Tesla's board of directors has put forth an ambitious compensation package for CEO Elon Musk, potentially worth around $29 billion in shares. This proposal comes in response to the escalating competition for AI talent and the pivotal moment Tesla finds itself in. The compensation plan is set to be voted on during the upcoming annual shareholder meeting in November. However, its implementation hinges on the outcome of a legal battle in which the Delaware Supreme Court may overturn a previous ruling that invalidated Musk’s 2018 compensation package due to its controversial negotiation process. Musk has expressed intentions to withdraw from Tesla’s AI and robotics initiatives unless he secures greater control over the company. His stance highlights an intense race among major corporations in the artificial intelligence sector, characterized by a frenzy of mergers and acquisitions. Concurrently, Musk has established his own AI venture, xAI, which has now acquired X, the social media platform he owns. In light of these developments, Tesla formed a special committee earlier this year, led by chairwoman Robyn Denholm and board member Kathleen Wilson-Thompson, to design a new compensation package. This proposal includes 96 million shares for Musk, which would vest over two years contingent on his continuous leadership role at Tesla and a five-year holding period for the stock. Unlike the previous compensation plan, this one does not tie Musk’s payout to specific performance goals, such as increasing Tesla's stock price. Based on Tesla’s current pre-market trading price, the package could be valued at approximately $29 billion. Musk would need to purchase the shares at a price of $23.34 each, amounting to a total value of roughly $26.7 billion. Should the Delaware Supreme Court rule in favor of Tesla’s appeal, the new compensation package may be forfeited to prevent Musk from receiving both the new shares and the options associated with his earlier performance award, as clarified by the company. Musk and his brother Kimbal, also a board member, have recused themselves from the discussions surrounding this new compensation package. The previous 2018 package, valued at about $56 billion, was criticized for including Musk’s direct input and his close ties to Tesla’s board members, leading to legal scrutiny and a judge’s decision to strike it down. The judge noted that the process was “deeply flawed” and lacked provisions to ensure Musk’s long-term commitment to Tesla. This legal controversy has fueled discontent among Tesla’s dedicated supporters and shareholders, prompting the company to relocate its incorporation from Delaware to Texas, a state noted for its more lenient shareholder protection laws. Tesla even conducted a shareholder vote to reaffirm the disputed compensation package, but the judge upheld her ruling, dismissing the company’s legal arguments as unprecedented.