Elon Musk Net Worth: How His $55B Salary Package 'Critical To The Future Success of Tesla'

Tesla is pushing hard to get shareholder approval for Elon Musk's compensation plan, even though a judge recently ruled against it. The company argues that the package is essential for Tesla's future achievements.

The critical question remains: why does Tesla's board believe a $55 billion compensation package is justified for Elon Musk? The company frames it as a matter of respect and fair treatment for their CEO.

Tesla is seeking shareholder approval to reinstate Musk's controversial £44 billion ($55 billion) compensation plan, previously rejected by a Delaware court. The court's decision on Musk's pay package was expected to cause a substantial decline in his estimated net worth of around $205 billion (£161.51 billion) as of January 31.

In a filing with the Securities and Exchange Commission (SEC), Tesla's board chair, Robyn Denholm, outlined several justifications for urging shareholders to approve Elon Musk's compensation package.

Denholm views the compensation package for Musk and the company's relocation to Texas as crucial for Tesla's future success. The top executive argues that shareholder approval of the pay plan is essential to "restore Tesla's stockholder democracy" and represents a matter of "fairness and respect" towards the CEO.

Tesla Board Chair Defends Musk Pay, Calls for Shareholder Approval

In the statement, Denholm emphasises that Musk has yet to receive compensation for his work at Tesla in the past six years, a period marked by significant company growth and shareholder value creation. She claims the Delaware court decision undermines this and argues that shareholders have benefited from Elon's leadership.

Despite recent headwinds, Tesla's stock price has soared nearly sixfold since 2018. While the company achieved record quarterly deliveries last month, sales growth stagnated between quarters due to price cuts, rising competition, and a concerning economic climate.

Aside from this, Tesla's filing suggests the compensation plan will motivate Musk to propel further company growth. The plan requires Musk to retain Tesla shares for five years after exercising stock options, aligning his financial rewards with long-term company success.

"He will continue to be driven to innovate and drive growth at Tesla because the value of his shares will depend on it!" according to the filing. These arguments echo Tesla's position regarding the compensation plan during last year's trial.

Shareholders will be able to weigh in at the company's upcoming annual meeting in June. In January, Delaware's Court of Chancery Judge Kathleen St. J. McCormick struck down Elon Musk's compensation plan, claiming the billionaire had undue influence due to close relationships with board members.

She concluded that this influence led to an unfair financial structure for the company. It is worth noting that Musk does not receive a traditional salary at Tesla. Instead, he receives compensation tied to achieving specific company performance milestones.

Established in 2018, the pay package involves stock options in 12 tranches, vesting upon Tesla reaching predetermined financial goals. As of last year, Tesla claims to have achieved all 12 targets, with each milestone achievement granting Musk equivalent to 1 percent of Tesla's outstanding shares at the time of the initial grant.

Despite a recent reduction in valuation to £37 billion ($47 billion) according to The New York Times (down from the original £44 billion/$55 billion), Tesla is requesting shareholder approval to reinstate Elon Musk's compensation plan. This filing comes shortly after Musk announced workforce reductions exceeding 10 percent at Tesla.