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Elon Musk. Image: Shutterstock
The board of directors of Tesla earned more than $3 billion (€2.6 billion) from stock awards, far exceeding the compensation granted to their peers at major US tech companies. This analysis by compensation and governance specialist Equilar reveals that Elon Musk’s brother Kimbal has earned nearly $1 billion (€850 million) through appreciated stock options since 2004. Director Ira Ehrenpreis has earned $869 million (€740 million) since 2007, and chair Robyn Denholm has earned $650 million (€553 million) since 2014.
Substantial gains despite suspension of grants
These sizeable gains occurred despite the fact that the board suspended the granting of new stock in 2020 to settle a shareholder lawsuit alleging excessive pay. Between 2018 and 2020, Tesla board members received an average of $12 million (€10.2 million) a year in cash and stock, eight times more than the average Alphabet director.
While all of the Magnificent Seven companies saw their share prices rise, boosting the wealth of their directors, Tesla stands out because of the key role played by the original stock awards in generating these huge gains for part-time board members. Even factoring in four years of suspended pay, average compensation for Tesla’s board members between 2018 and 2024 remains two and a half times higher than that of Meta’s directors, the second-best-paid group.
Tesla has defended its board compensation as being directly tied to share performance and the creation of shareholder value, stressing the “significant time and effort” they devote through frequent meetings. However, the practice of compensating directors in stock options rather than shares has drawn criticism from some corporate governance experts, who argue that it amplifies the upside potential without exposing them to the same downside risk.
Concerns about liability
Stock options give the right to buy company shares after a certain period at a predetermined price. Experts believe this structure lacks accountability because option holders are not obliged to buy the shares if their value falls below the predetermined price, which can lead to unexpected and unfair windfalls.
Corporate governance experts interviewed by Reuters are concerned that Tesla’s exceptional compensation could jeopardise the independence of its board members. They say the generous stock options could discourage directors from challenging the CEO for fear of losing their lucrative board seats.