Elon Musk will likely retain a $47 billion compensation package from Tesla despite the company’s overwhelming issues.
Tesla’s CEO Elon Musk, one of the world’s richest people, could see its net worth increase by an additional $47 billion this year. It would be as compensation for his chief executive role in Tesla, the world’s largest electric vehicle maker.
The compensation package, originally worth $56 billion, contains 13% of the company’s shares. Elon Musk already owns 20.5% of the company, with a total estimated net worth of $184.8 billion (including his stakes in other firms).
The package was originally approved in 2018 but was ruled out by a Delaware court. Judge Kathleen McCormick alleged Musk had “heavily influenced” the board in its decision.
However, with Musk also proposing Tesla move to Texas, he will be outside of Delaware’s jurisdiction. Both the compensation package and the Texas relocation will be voted on June 13th at Tesla’s annual shareholder meeting.
The board overwhelmingly voted in favor of Musk’s payday cut, saying the CEO successfully guided the company through a period of “transformative and unprecedented growth.”
“On the package which was already approved by shareholders at the time in 2018,” Wedbush Securities analyst Dan Ives said in a note, “this has been an area of contention among some investors but we would expect the 2018 package will be reapproved and the Delaware court ruling would be moot in essence as Tesla will now be moving to Texas.”
Transformative and unprecedented decline
Since the package was first approved, however, Tesla’s place in the EV market changed drastically. In 2018, Tesla occupied the vast majority of the EV market share, while today its position is tethering.
In early 2024, Tesla sales plunged 8.5%, much more than expected. Tesla’s latest model, the Cybertruck, has been an overwhelming failure, with Musk himself admitting they had “dug their own grave”.
Tesla’s long-awaited cheap EV model was scrapped off the development board, with Musk refocusing completely on self-driving taxis.
Year-to-date, Tesla’s stock dropped almost 40%, even though the S&P 500 index increased by 5%.
Moreover, Tesla is not the sole EV competitor anymore. Competition from European and especially Chinese companies is ever more fierce. The Chinese BYD even temporarily overcame Tesla as the world’s largest EV company earlier this year.
Finally, demand for EVs is not as exciting as previously thought. A recent report showed that American consumers still prefer hybrid cars to fully electric ones.
These challenges will keep eroding Tesla’s market share and value. Unless Elon Musk acts quickly, no multi-billionaire compensation package will save Tesla from decline.
