LEILA FADEL, HOST:
Tesla's board of directors has approved an enormous new pay package for Elon Musk if he continues to lead the company for at least two more years. An earlier, even bigger award to Musk has been at the center of a legal battle. NPR's Camila Domonoske covers cars and has been following the saga, and she joins us now. Good morning, Camila.
CAMILA DOMONOSKE, BYLINE: Good morning, Leila.
FADEL: So what exactly is in this pay package?
DOMONOSKE: Well, it's an award of stock, so the exact value fluctuates along with the share price. But at the time that this package was approved by the board, it was worth somewhere $24 and $29 billion.
FADEL: Ooh.
DOMONOSKE: And it's really hard to exaggerate how much money that is. It's more than any CEO of a publicly traded company has ever been paid for anything, and it is not even close. This is only a portion of what Tesla is planning to pay Musk. In a letter to shareholders, the members of the board who spearheaded this, they described this stock award as a first step while they plan long-term compensation. And the whole thing is going to be moot if Tesla and its board win this court case where they're trying to pay Musk even more than that. He's going to get one pay package or the other. He's not going to get both of them.
FADEL: So let's talk about this other pay proposal. Why is it the subject of a court battle?
DOMONOSKE: Back in 2018, the Tesla board approved this pay package for Elon Musk that was both unusual and extraordinarily large. It had these different tiers where if Tesla stock hit this value, he'd get this much stock. If it hit this value, he'd get this much stock. And at the time, the tiers, the requirements, seemed kind of absurd, like they were impossible. But it turns out they weren't impossible because Tesla met those requirements, and Musk got all of the stock in this pay package. At one point, when the stock's price reached its peak late last year, that award was valued at a hundred billion dollars.
But a shareholder had brought a lawsuit saying that this was basically just an absurd amount of money to pay a CEO, and a judge in Delaware agreed. She had found that the board was too cozy with Elon Musk and that their shareholders didn't get all the information that they needed when they voted to approve it. They couldn't make an informed choice. Tesla has appealed, and this hasn't been resolved. It's still disputed. In the meantime, Musk hasn't gotten any pay, aside from all the Tesla stock he already owns. That stock has gone down recently, but he's made a lot of money off it over time.
FADEL: Why does the board want to give Elon Musk even more money?
DOMONOSKE: Well, in that letter to shareholders, the board members say that, quote, "a deal is a deal" - right? - that they agreed to pay Musk this money. He met the requirements. It's only fair. The board also argues that Elon Musk is the key to the company's future success, and that might seem a little surprising right now because Musk is also very damaging for Tesla's brand at the moment. There's plenty of data suggesting that he's driving some customers away. But Tesla's board and certainly a lot of Tesla investors think that it's Musk's vision and his execution that make the company succeed not just at selling cars but at these incredibly ambitious plans for AI and robots. They also think he attracts talent 'cause people want to work for him. So they want Musk to stay. That's why there's this provision that he only gets the pay if he serves continuously in a senior role for the next two years. The board members, they say they want to incentivize Musk to focus on Tesla, and they think that $24 to $29 billion ought to do the trick.
FADEL: NPR's Camila Domonoske. Thank you, Camila.
DOMONOSKE: Thank you. Transcript provided by NPR, Copyright NPR.
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