Elon Musk is the richest man in the world and now, thanks to the board of his company, he gets to be the richest and highest-paid CEO in the world as well. The Tesla board on Sunday approved an “interim award” of 96 million restricted shares for the CEO.
“It is imperative to retain and motivate our extraordinary talent, beginning with Elon,” Tesla board chair Robyn Denholm and fellow director Kathleen Wilson-Thompson wrote in a letter to shareholders. “The war for AI talent is intensifying, with recent months including multibillion-dollar acquisitions of companies and nine-figure cash compensation packages for non-founder, individual AI engineers.”
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Fortune reports that technically, the award will be made in restricted shares, but Musk has to pay $23.34 per share to own the stock—the same strike price as his 2018 options, with Tesla’s stock trading at more than $300 a share, the arrangement gives Musk about $280 per share of built-in value, which some comp experts have referred to as “discounted options.”
The reason Musk’s exorbitant pay rise went unchallenged and was backed by the board is because the board adopted a bylaw which required any investor who wants to challenge Musk’s pay to hold 3% of Tesla stock. This means that any board member who wants to give Musk a pay cut will have to shell out at least $3 billion.
The Tesla board has reinstated Musk as the highest-paid CEO in history with a staggering new $29 billion pay package at the current stock price.
Brian Dunn, a 40-year compensation practitioner and director of the Institute for Compensation Studies at Cornell University, told Fortune Musk’s new award resembles what some experts have referred to as “fog-the-mirror grants.”
“If you’re around and have enough breath left in you to fog the mirror, you get them,” said Dunn. “These don’t have performance targets.”
“The central theme here is that Tesla has moved its jurisdiction of incorporation from Delaware to Texas, and as a result the propriety of Tesla’s actions and Musk’s compensation will have to be judged under Texas law, which is more permissive,” wrote Columbia law professor John Coffee in a statement to Fortune. “Tesla may get sued, but the odds are more in its favor in Texas.”
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A key enabler is Tesla’s corporate governance framework, which is unusually founder-centric. Musk holds significant influence not only as CEO but also through close personal and financial ties with several board members, many of whom have longstanding business or personal relationships with him.
Additionally, Tesla’s decision to reincorporate in Texas plays a pivotal role. Texas corporate law affords greater deference to board decisions than Delaware, where courts more frequently intervene in executive pay cases. In Delaware, Musk’s original 2018 compensation package was voided by a judge who cited conflicts of interest and a flawed approval process. By moving to Texas, Tesla effectively reset the legal stage, making it harder for shareholders to contest new compensation deals under similarly strict scrutiny.
Furthermore, Tesla has strategically framed Musk’s compensation as necessary for retaining key leadership during a critical AI-driven growth phase. Combined with the structure of the award—restricted stock units with built-in value but no performance hurdles—this allowed the board to approve the package while minimizing legal and investor risk.