Tesla’s board of directors has approved a new, massive stock-based compensation package for CEO Elon Musk, valued at approximately $29 billion, aimed at retaining him during a critical transition phase for the company. This development comes while Musk is still appealing a Delaware court’s decision that invalidated his earlier 2018 pay package, originally worth more than $50 billion.
The new award is designed not only to secure Musk’s continued involvement in Tesla’s transformation but also to reassure investors that the CEO remains committed amid market challenges and legal complications.
Background: Why the 2018 Pay Package Was Voided
In 2018, Tesla awarded Musk a landmark compensation plan that tied his earnings to the company hitting ambitious performance and market cap milestones. The deal, approved by shareholders, offered Musk up to 12 tranches of stock options if Tesla’s market value and financial targets were met.
Over the years, Tesla exceeded many of those targets, leading to Musk unlocking the full package, which was valued at over $55 billion at peak share prices.
However, in January 2024, the Delaware Court of Chancery ruled that the 2018 compensation plan was unfair to shareholders. The court found that the Tesla board lacked independence, and the approval process was flawed due to Musk’s close ties to board members. As a result, the judge voided the package, ordering Tesla to rescind the compensation.
Tesla later attempted to retroactively ratify the 2018 award through a shareholder vote in 2024, but in July 2025, the court reaffirmed its rejection, stating that the ratification did not correct the original procedural defects. Musk is currently appealing this decision to the Delaware Supreme Court, but the legal resolution may take several more months or even years.
New Stock Award: What Tesla Is Giving Musk Now
In light of the legal uncertainty, Tesla’s board created a new compensation package for Musk, aiming to retain him as CEO and incentivize his leadership through the company’s next phase.
Key features of the new award include:
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96 million restricted stock units (RSUs) awarded to Musk.
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Each share carries a strike price of $23.34, the same price Musk would have paid under the 2018 plan. Tesla stock currently trades at over $300.
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The shares will vest over two years, as long as Musk remains in his position through August 3, 2027.
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Musk is required to hold the shares until at least 2030, preventing immediate sell-offs for short-term gain.
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If the court ultimately reinstates the original 2018 plan, this new stock grant will be canceled or offset to avoid double compensation.
Tesla emphasized that the new award is not a replacement for the 2018 plan but rather a temporary and independent retention measure that aligns with shareholder interests while the legal dispute remains unresolved.
Tesla’s Performance and Market Challenges
The new compensation deal comes at a time when Tesla is under mounting pressure. Despite being one of the most valuable automakers in the world, the company has faced several setbacks in 2025:
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Tesla’s stock (TSLA) has dropped by 25% year-to-date amid falling vehicle sales and reduced revenue from regulatory credits.
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The company is facing intensifying global competition, particularly from Chinese electric vehicle (EV) manufacturers like BYD and NIO, which offer lower-cost EVs in international markets.
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The loss of U.S. federal EV tax credits due to changes in domestic policy—backed by the current administration—has severely impacted Tesla’s competitive advantage in North America.
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Tesla’s once-lucrative carbon credit sales to traditional automakers have also declined as those companies ramp up their own EV production lines.
The company’s Q2 2025 earnings report reflected these issues, showing reduced margins, lower vehicle deliveries, and weakening demand for its core product lines.
Tesla’s board is not only dealing with financial challenges—it’s also trying to repair the damage caused by Musk’s foray into U.S. politics.
In late 2024 and early 2025, Musk spent tens of millions of dollars supporting Republican political candidates in key state and federal elections. His active political campaigning included hosting rallies, funding political action committees (PACs), and using his X (formerly Twitter) platform to influence public opinion.
Although Musk’s candidates won several races, his political involvement had unintended consequences for Tesla:
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Protests erupted at Tesla dealerships across the U.S. in response to Musk’s political actions, leading to bad press and negative sentiment among consumers.
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Some environmentally conscious customers stopped purchasing Teslas, citing concerns about the company’s perceived alignment with partisan agendas.
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The removal of EV subsidies under President Trump’s 2025 policy platform directly harmed Tesla’s ability to offer price-competitive vehicles in the U.S.
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Shareholder trust declined as many investors believed Musk was no longer focused on Tesla’s day-to-day operations.
This shareholder unrest was reflected in the company’s slipping stock value, prompting the board to act swiftly to tie Musk back into Tesla’s leadership in a formal, enforceable way.
Tesla’s Future Strategy: AI, Robotics, and Robotaxis
Despite its struggles in the EV market, Tesla is not standing still. Musk has been redirecting Tesla’s long-term strategy away from being just a car manufacturer and toward becoming a technology platform for AI and robotics.
Key initiatives now being prioritized include:
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The rollout of Tesla Robotaxi, a self-driving ride-hailing service expected to launch in limited cities later this year. Though scaled back from Musk’s initial promises, the program is moving forward.
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Development of Tesla Optimus, a humanoid robot intended for labor-intensive environments like manufacturing and logistics. Prototypes have been tested internally, and pilot programs are planned for late 2025.
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Greater integration of AI-driven software across Tesla’s products, including full self-driving (FSD) technology, energy grid solutions, and smart home devices.
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Partnerships with chipmakers and data centers to accelerate Tesla’s capabilities in machine learning and robotics processing.
Tesla’s board has made clear that Musk’s continued leadership is critical to delivering on this new vision, despite the challenges of transitioning away from core automotive revenue.
Tesla Stock and Market Response
Following the announcement of the new pay package, Tesla shares rose nearly 3% in premarket trading, signaling cautious investor optimism. While the market remains volatile, some analysts believe the compensation deal—tied to future performance and subject to legal clarity—sends a strong message about stability.
However, critics argue that the board’s continued financial favoritism toward Musk, even amid ongoing legal and shareholder controversies, raises governance concerns. Institutional investors and governance watchdogs have called for greater board independence and more transparent executive accountability.
