Big money is at play as controversy brews across global markets, Tesla's board of directors have earned an astounding £2.5 billion in stock based awards, massively outstripping compensation for directors at other major technology companies.
This unbelievable figure comes from years long accumulation of stock options that have rocketed in value as Tesla's share price climbed relentlessly. Although the board halted compensation in 2021 due to challenges over executive pay, the wealth generated from earlier awards continues to dwarf what peers receive in the Elon Musk-led company.
Why the Tesla Board Made So Much Money
As per an exclusive Reuters report, it seems that between 2018 and 2024, Tesla's directors amassed more than £2.5 billion approximately ($3 billion) in gains from stock awards, far in excess of those realised by board members at other major technology companies at the time their awards were granted.
This specific insight comes from an analysis by governance specialist Equilar for Reuters, which underlined just how out of step Tesla's approach has been compared with its contemporaries.
Moreover, among the most massive beneficiaries is Kimbal Musk, brother of Tesla chief executive Elon Musk, who has made nearly £787 million (approx) from stock options awarded since 2004. Meanwhile, director Ira Ehrenpreis has accumulated around £683 million since 2007, and chair Robyn Denholm has earned about £511 million since joining the board in 2014, as per current USD conversion rates.
Now, these mouth watering figures were achieved even though the board agreed to suspend director compensation from 2021 following a somewhat crisis about excessive pay. Before that pause, directors collected around £9.4 million (approx) in combined cash and stock rewards between 2018 and 2020, which is around eight times the average pay at other flagship technology companies during the same period.
Furthermore, Tesla's game plan has been to award directors with stock options rather than outright shares, as per some reports, which is a practice that is rare in large public companies. This is because an option gives the holder the right to buy shares at a set price in the future, allowing them to benefit fully if the company's stock rises without exposing them to losses if the price falls below the set threshold. So, critics point out that this structure magnifies upside potential with no downside risk and makes directors exceptionally wealthy simply through stock price appreciation.
However, the board itself has stressed that its compensation model is not excessive, saying, as per sources, that pay is closely tied to Tesla's stock performance and the value delivered to shareholders. A company spokesperson pointed out that directors provide invaluable service and commit a whole lot of time and effort, showing 58 full board or committee meetings in 2024 alone, which are well above usual norms for large corporations.
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How Tesla Compares to the Magnificent Seven
Now, when set against boards at other major tech firms, Tesla's rewards look even more mind blowing. Over the same span from 2018 to 2024, Tesla directors earned on average about £1.34 million per year (approx) in combined pay, including years when compensation was paused. This makes it about two and a half times the average rewards of directors at Meta, which was the next most highly compensated board among the so called 'Magnificent Seven' technology companies.
The 'Magnificent Seven' refers to Apple, Microsoft, Alphabet, Amazon, Meta, Nvidia and Tesla because these seven tech giants have dominated stock market gains and led much of the growth in major indices due to their scale, profitability and leadership in areas like AI, cloud computing and electric vehicles.
Furthermore, for many governance experts, the main part of the debate is not just the size of the windfalls but the incentives they create. Directors who stand to benefit enormously from rising stock prices may be less inclined to challenge executive decisions or strategic directions that could undermine the interests of ordinary shareholders, critics say. This worry is exacerbated by the close personal and professional ties many on Tesla's board have with Elon Musk, which has been a point of worry before, too, as per reports.
Tesla's governance practices also contrast a lot with those at other leading firms, where directors typically receive restricted shares or cash fees tied to their oversight roles, instead of options that can balloon in value as stock prices rocket up. As per sources, only a small percentage of large S&P 500 firms still award stock options to outside directors, underlining how unusual Tesla's approach has become.
But, in spite of such controversies, some investors appear untroubled by the headline numbers. Tesla's share price has shown big gains even following reports of how much the board has made, showing that confidence in the company's future goals remains strong among the market.
