Tesla's board of directors has given the green light to a whopping $29 billion stock award to CEO Elon Musk, which it described as a "first step, good faith payment" designed to ensure his ongoing leadership as the company pushes aggressively into artificial intelligence and robotics.
In a shareholders' letter published on Monday, board members Robyn Denholm and Kathleen Wilson-Thompson emphasized the need to retain Musk's leadership at the helm: "Having Elon stay is more crucial than ever before," they stated. "Today, Tesla stands at a pivotal inflection point that can unlock further exceptional value for you, the shareholders."
The recently conferred award consists of 96 million restricted stock units, valued currently at about $29 billion based on the price of Tesla shares.
It is equivalent to almost one-third of Musk's much-criticized 2018 pay deal, which still hangs in judicial uncertainty after two rejections at Delaware court despite getting support from Tesla's shareholders.
Tesla's board justified the lucrative compensation by pointing to the intensifying war for the best artificial intelligence talent, citing a recent spate of high-priced acquisitions and "nine-figure cash compensation packages for non-founder, individual AI engineers."
In Through Elon's vision and leadership," the board continued, "Tesla is evolving from its position as a pioneer in the electric vehicle and clean energy businesses to expand into a leader in AI, robotics and related services.
The conditions of the package mandate Musk to stay in a high-level leadership role at Tesla for a minimum of two years and impose a five-year holding requirement on the granted stock. If ultimately the courts validate the 2018 compensation plan, the new award will be invalidated to prevent "double dip" benefits.
This daring step arrives as Tesla is under mounting pressure, such as a 25% decline in its stock price since the start of the year and stiff competition from Chinese manufacturers. The company's most recent financial report revealed a steep fall in profits—from $1.39 billion to only $409 million in the latest quarter.
While others have criticized that such a huge compensation package is dubious in light of Tesla's present woes, its board stood by the move citing Musk's earlier achievements. The 2018 package, they explained, cost Tesla $2.3 billion worth of stock-based compensation but added $735 billion to its market value.
Responding to shareholders' concerns that Musk's focus is being divided across multiple ventures—his AI venture xAI, his aerospace venture SpaceX, and his role in the Trump administration—the board nonetheless declared complete confidence in his leadership. They hope the new agreement will "incentivize Elon to stay at Tesla and concentrate his unparalleled leadership skills on continuing to create shareholder value.
Tesla also said it would detail a broad, multi-year CEO compensation plan at its annual shareholder meeting on Nov. 6.
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