MW Elon Musk pay talks at Tesla present dilemma given automaker's premium and his controversial profile

By Jules Rimmer

FT report says Denholm and a director will evaluate Musk compensation

Tesla's board is negotiating a new pay deal for CEO Elon Musk, according to a published report, in what represents a challenge given that his personal involvement represents both positive and negative implications for the company.

The Financial Times reported that Tesla's chairperson Robyn Denholm and director Kathleen Wilson-Thompson will explore his pay package. The report, citing several people familiar with the matter, said it will also explore alternative ways to compensate Musk if his 2018 pay deal isn't restored.

A Securities and Exchange Commission filing for the automaker has simply stated that the board has established a special committee "to consider certain compensation matters involving Mr. Musk."

That's a tricky situation to manage, not least because only a few weeks back, it denied a Wall Street Journal story that a new CEO was being sought to replace him.

The new committee, specifically established to adjudicate the remuneration package, may decide that despite all the controversy, it has no choice but to keep him happy and persuade him to stay.

The pay deal is in focus because a Delaware court blocked Musk's 2018 salary package worth $56 billion then (and approximately $100 billion now) as excessive. While it's being appealed to Delaware Supreme Court, a revised reward package for Musk is under discussion, according to the FT.

Since his endorsement of Trump as a presidential candidate in 2024, Musk has become a controversial and polarizing figure. His relationship with Trump, his public utterances, his spearheading of the DOGE campaign to eliminate government spending and his colorful personal life all contributed to a sudden brand destruction.

Attacks on dealerships and product boycotts illustrated the toxicity of a brand which had hitherto suggested luxury and desirability. From a 2025 peak of $428 on the eve of Trump's inauguration, Tesla's stock more than halved to an April low of $221.

Tesla shares $(TSLA)$ rose 1% in premarket trade on Wednesday, though it's down 17% on the year.

The issue for Tesla's board to settle, then, is whether the brand is irreversibly poisoned. Canvassing major shareholders and institutional investors is an important factor to consider, but much of Tesla's premium valuation owes itself to the support of retail investors who worship his iconic image and prize Musk's idea generation, futuristic thinking, entrepreneurial vision and his engineering creativity.

Moreover, while Musk's reputation has taken some big hits of late, culminating in Bill Gates' accusation last week that Musk was "killing the world's poorest children," there's no denying that the proximity to Trump's orbit provides access to power and influence and creates unique business opportunities. As recently as Tuesday, Musk shook hands with the crown prince of Saudi Arabia as part of Trump's entourage. Quantifying the value of such connections is difficult but it's clearly not bad for business. A story in Rolling Stone this week argues that Musk's political affiliation is demonstrably good for business. Tesla's profits from government contracts and regulatory credits have been assessed as $38 billion.

Perhaps the most transparent way to attach value to Musk's helming of Tesla is to consider its premium valuation compared to other automakers. By market capitalization, Tesla is four times larger than its nearest competitor, Toyota $(TM)$.

However, when the world's top ten automakers are ranked by revenue, Tesla doesn't make the list. It comes in eleventh. In terms of profits, it's tenth. Tesla's price-to-trailing earnings ratio of 184 dwarves that of the S&P 500's 25 and even that of the "Magnificent Seven" 33, according to FactSet.

So when committee members Denholm and Wilson-Thompson calculate the strategy to take with Musk, they will see that unseating Musk would have painful repercussions for the share price in the short-term because, for better or worse, the company's fortunes are inextricably linked with his.

-Jules Rimmer

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May 14, 2025 06:23 ET (10:23 GMT)

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