Tesla Inc. has announced an unprecedented $29 billion (approximately Ksh.3.8 trillion) interim compensation package to its Chief Executive Officer, Elon Musk. This landmark award, approved by Tesla’s board of directors, comes amid a prolonged legal dispute over Musk’s original 2018 pay deal, which was valued at $55.8 billion and later struck down by a Delaware court.

The board described the interim pay as a “good faith” measure intended to compensate Musk for his ongoing leadership and significant contributions to Tesla’s growth and innovation. It also serves as a strategic move to maintain stability within the company as Musk faces growing pressure from activist shareholders.

Background: The Legal Battle Over Musk’s Original Pay Deal

In 2018, Tesla’s board approved a compensation package for Musk based on performance milestones tied to the company’s market capitalization, revenue, and profitability. This deal, valued at nearly $56 billion, was hailed as one of the largest CEO pay packages in history.

However, in early 2024, a Delaware court ruled against the package, citing it as excessive and unfair to Tesla’s shareholders. The court’s decision marked a significant rebuke of Musk’s pay arrangement, emphasizing the need for greater accountability and fairness in executive compensation.

Musk has since appealed the ruling, seeking to overturn the court’s decision and reinstate the original package. Until the appeal is resolved, Tesla has opted to award this interim pay package as a temporary measure.

Details of the Interim Compensation Package

The newly approved interim pay package involves Tesla awarding Musk 96 million shares, substantially increasing his stake in the company to about 13%. The board has emphasized that this award is provisional and subject to forfeiture if the appeals court rules in Musk’s favor and reinstates the 2018 compensation.

Tesla’s board members, including Robyn Denholm and Kathleen Wilson-Thompson, addressed shareholders in a letter posted on Tesla’s official X (formerly Twitter) account. They highlighted the critical importance of retaining Musk’s leadership during a pivotal time in Tesla’s evolution, underscoring his role in maintaining the company’s competitive edge in the electric vehicle industry.

Shareholder Concerns and Governance Issues

The enormous interim pay package has renewed debate about executive compensation and corporate governance at Tesla. Critics argue that the board may be prioritizing Musk’s retention over shareholder interests and financial prudence.

Tesla shareholders and market analysts have expressed concern that such a large payout to the world’s richest person may undermine investor confidence and raise questions about the board’s independence and oversight capabilities.

Meanwhile, Musk’s supporters contend that his visionary leadership is indispensable to Tesla’s success, justifying the substantial compensation despite the controversy.

Implications for Tesla’s Future

Tesla’s decision to award this interim pay highlights the company’s reliance on Elon Musk as a transformative leader in the automotive and technology sectors. The payout also reflects the challenges Tesla faces balancing leadership retention with shareholder demands for responsible governance.

As the appeal progresses, the outcome will significantly influence Tesla’s corporate governance policies and Musk’s long-term role within the company.

With Tesla continuing to push forward innovations in electric vehicles, energy storage, and autonomous driving, Musk’s leadership remains a key factor in sustaining Tesla’s industry dominance.