Key Points
- Tesla board members have collectively earned more than $3 billion in stock awards.
- This is far more than the directors at other “Magnificent Seven” tech companies, such as Apple and Google.
- The large pay is due to massive stock grants made between 2018 and 2020, which later appreciated significantly.
- Critics argue the “ridiculously” high pay compromises the board’s independence from Elon Musk.
Members of Tesla’s board of directors have made more than $3 billion from stock awards, a staggering sum that far outpaces what their peers at other major tech companies have earned. This massive payday is now raising serious questions about the board’s independence from CEO Elon Musk.
A new analysis by the firm Equilar reveals the huge windfalls. Elon Musk’s brother, Kimbal, has earned nearly $1 billion since 2004, while board chair Robyn Denholm has made $650 million since 2014. These directors received massive payouts even though the board hasn’t granted new stock options since 2020, when it suspended its own compensation to settle a shareholder lawsuit over excessive pay.
The core of the issue is that between 2018 and 2020, the average Tesla director received about eight times as much in compensation as a director at the next highest-paying tech giant, Alphabet. The value of those awards then exploded as Tesla’s stock price soared.
Tesla’s board also paid itself in stock options, a rare and controversial practice that magnifies potential gains with no downside risk. This has led corporate governance experts to argue that the board is “ridiculously overpaid” and that its high compensation undermines its ability to provide independent oversight of the company and its celebrity CEO.
“Are you actually incentivized to do a better job by being paid this much? Probably not,” said Douglas Chia, a corporate-governance consultant.
The concern is that when a board seat is so lucrative, directors may be afraid to challenge the CEO for fear of losing their position.
