# Tesla Board Approves New $56 Billion Pay Package for elon Musk
Tesla’s board of directors has approved a new compensation package for CEO Elon Musk, valued at $56 billion, following a contentious legal battle over his 2018 pay.The proclamation sent Tesla stock climbing about 2% Monday.
## New Compensation Details
the company detailed the package in a filing Sunday, outlining that the award will vest over two years contingent on musk remaining as CEO or holding another key executive position.
This new agreement is structured wiht a significant caveat: it will be forfeited if Musk ultimately prevails in the ongoing legal dispute and is able to exercise his original 2018 compensation package.This effectively creates a conditional reward,tied to the outcome of the Delaware court proceedings.
## The Ongoing Legal Battle Over Musk’s 2018 Pay
The current situation stems from a challenge to Musk’s 2018 pay package, which was initially approved by Tesla shareholders but later deemed excessive and improperly granted by a Delaware judge. In january, Chancellor Kathaleen McCormick upheld a prior ruling in the case, Tornetta v. Musk, finding fault with the compensation plan’s approval process. Despite this ruling, Tesla shareholders reaffirmed their support for the pay package in June 2024.
The case is currently being appealed before the Delaware Supreme Court, setting the stage for a perhaps landmark decision regarding corporate governance and executive compensation.
## Context: A Weak Earnings Report and Future Outlook
The announcement of the new pay package arrives after a challenging period for Tesla. The electric vehicle (EV) maker recently reported a weak earnings report,missing both revenue and profit expectations. Sales have declined for two consecutive quarters,with automotive revenue dropping 16%.
During a post-earnings call with analysts, musk acknowledged potential headwinds, including the phasing out of EV tax credits. “We probably could have a few rough quarters. I am not saying that we will, but we could,” he stated, signaling a cautious outlook for the near future. The company is scheduled for another shareholder meeting in November.
## Understanding Musk’s 2018 Pay Package
Musk’s 2018 compensation plan was ambitious, tying his pay to achieving specific performance targets for Tesla. remarkably, the company successfully met all of those objectives. However, the sheer scale of the potential payout – described by the judge as “the largest potential compensation prospect ever observed in public markets” and 33 times larger than his previous package - drew intense scrutiny.
The judge’s decision highlighted concerns about the fairness and clarity of the approval process, ultimately leading to the current legal challenge and the subsequent offer of a new, conditional package.
