Tesla board made $3b from stock awards

Tesla’s board of directors has received over US$3 billion in stock awards during their tenures, far exceeding compensation given to board members at other large US tech firms, according to an analysis by compensation firm Equilar.

The analysis found that Tesla directors’ average annual compensation was about US$1.7 million, more than double that of Meta’s directors for 2018 to 2024.

Between 2018 and 2020, Tesla directors earned about 8x as much as their peers at Alphabet.

Board members, including CEO Elon Musk’s brother Kimbal, have collectively cashed out hundreds of millions of dollars in stock options, with some individual payouts nearing US$1 billion since 2004.

Tesla paid directors primarily in stock options rather than shares, a rare practice among large US companies.

🔗 Source: Reuters

🧠 Food for thought

Implications, context, and why it matters.

Tesla used stock options for director pay, not shares

Tesla used stock options, not restricted shares, to pay directors 1. The approach is rare at big US companies. Governance experts said it can weaken independence 1. Options let directors buy stock at a preset price after a wait. Below that price, options are worthless. When shares climb, returns can surge 1.
Most boards grant restricted shares that vest over time 1. That ties pay to long term investor value 1. Large option grants can sway oversight of Tesla and its CEO Elon Musk 1.
In 2021 Tesla suspended director pay after a shareholder lawsuit over excessive pay. No new stock grants have gone to directors since 2020. Earlier awards soared as the share price rose. Tesla said its pay aligns with stock performance and shareholder value.

Consultancies and proxy advisors see demand after scrutiny of director pay

More scrutiny of equity‑heavy director pay is creating work for advisory firms such as Compensation Advisory Partners (an executive compensation consultancy) and Equilar. They offer focused reviews and peer benchmarks.
Proxy advisors guide institutional investors on votes. These firms can build better analytics for director pay proposals 1. The tools separate options from restricted shares. Models test fit with governance best practices 1.
Governance tech vendors are building software for director pay workflows. The tools log compensation committee steps. They track input from independent consultants. Platforms help run shareholder votes on pay.