? The Tesla board on Sunday approved an “interim award” of 96 million restricted shares for CEO Elon Musk. His original 2018 moonshot mega-grant, previously valued at $56 billion, has been tied up in Delaware courts for the past seven years after a judge rescinded the pay package—twice. Since then, Tesla moved to Texas from Delaware, and the board adopted a bylaw requiring any investor who wants to challenge Musk’s pay to hold 3% of Tesla stock. The amount is equivalent to roughly $3 billion, helping inoculate Tesla against repeat challenges to Musk’s pay plan.

The Tesla board has reinstated Elon Musk as the highest-paid CEO in history with a staggering new $29 billion pay package. His new deal with the $970 billion electric-vehicle maker comes after a Delaware judge twice rescinded Musk’s previous moonshot mega-grant. Musk’s pay has been held up in litigation for the past seven years.

“It is imperative to retain and motivate our extraordinary talent, beginning with Elon,” Tesla board chair Robyn Denholm and fellow director Kathleen Wilson-Thompson wrote in a letter to shareholders. “The war for AI talent is intensifying, with recent months including multibillion-dollar acquisitions of companies and nine-figure cash compensation packages for non-founder, individual AI engineers.”

Even in that select group, “no one matches” Musk, the board members wrote. Thus, the nearly $30 billion award is essential to keeping Musk focused on Tesla—and getting him to recruit new talent to keep the EV manufacturer competitive in AI, robotics, and robotaxis, according to the board. Unlike Musk’s previous pay plan, which included significant shareholder value hurdles he had to overcome, all Musk has to do to collect the new award is remain with Tesla as CEO or in a senior executive role for the next two years. He also has to hold the stock until 2030, according to the terms of the award, which will boost his ownership stake from around 13% to 15%.

Brian Dunn, a 40-year compensation practitioner and director of the Institute for Compensation Studies at Cornell University, told Fortune Musk’s new award resembles what some experts have referred to as “fog-the-mirror grants.”

“If you’re around and have enough breath left in you to fog the mirror, you get them,” said Dunn. “These don’t have performance targets.”

Technically, the award will be made in restricted shares, but Musk has to pay $23.34 per share to own the stock—the same strike price as his 2018 options. With Tesla’s stock trading at more than $300 a share, the arrangement gives Musk about $280 per share of built-in value, which some comp experts have referred to as “discounted options.”

Larry Cunningham, director of the University of Delaware’s Weinberg Center for Corporate Governance, said that regardless of how the award could be classified for accounting or tax purposes, there’s a simple and accurate description for it.

“A deep-in-the-money stock option grant, awarded solely for retention,” Cunningham told Fortune in a statement.

Musk’s pay package has a $26 billion floor

The new package creates what Farient Advisors’ Eric Hoffmann described as a “floor-and-ceiling” arrangement tied directly to the outcome of the ongoing litigation in Delaware, which Tesla has appealed. If courts again wipe out his original 2018 award of 303 million stock options, Musk gets to keep the new 96 million shares, worth about $29 billion at the current stock price. But if any part of the original grant gets reinstated, the new award will shrink accordingly, said Hoffmann.

“There’s a clause that says ‘no double dipping,’” he said. “But this 96 million share award could be used to make up any of the original grant if he loses in the course of the legal action.”

Hoffmann said the territory the Tesla board is treading is “unprecedented” in executive compensation.

“There’s no playbook for this,” said Hoffmann, who analyzed the terms of the award. “They made the first grant, it got overturned by a judge; they made another grant, got it approved by shareholders, and then that got held up.”

To level set, a shareholder challenge over Musk’s 2018 pay package led to a landmark opinion in which Musk’s pay was rescinded. The Tesla board then sent the pay plan back to shareholders in 2024 for a say-on-pay vote approval, and shareholders voted in favor of giving Musk the comp. Last December, the same judge—Delaware Court Chancellor Kathaleen McCormick—declined to reverse her previous decision, which Tesla has since appealed.

In its letter to investors, the board wrote there’s no telling when the court will rule again and described this award as a “first step, ‘good faith’ payment to Elon.”

However, Tesla’s performance in 2025 is a far cry from 2018, when the board first awarded Musk his daring moonshot grant. He followed the award up by multiplying Tesla’s value 12-fold. Its market cap surpassed $1 trillion in October 2021 and again in May 2025. But recently Tesla has struggled. Year to date, its share price is down more than 18%, and Musk has been active politically, supporting President Donald Trump despite the affiliation turning off Tesla’s climate-focused consumer base, particularly in California.

And this time, the board has left little to chance. Tesla erected a significant legal barrier in May that makes a challenge to this award a lot more difficult to mete out.

After McCormick’s ruling, Tesla shareholders approved a move from being incorporated in Delaware to Texas. In May, Texas amended its business code, and Tesla modified its bylaws accordingly a day later. The bylaw amendment created a new threshold so any shareholder who wants to challenge Musk’s pay in court has to hold at least 3% of Tesla’s stock. The value is worth more than $3 billion.

“The central theme here is that Tesla has moved its jurisdiction of incorporation from Delaware to Texas, and as a result the propriety of Tesla’s actions and Musk’s compensation will have to be judged under Texas law, which is more permissive,” wrote Columbia law professor John Coffee in a statement to Fortune. “Tesla may get sued, but the odds are more in its favor in Texas.”

Texas followed Tesla’s move by undertaking a campaign to make it a business-first state. At this point, it’s unclear how Texas courts would approach a challenge.

“It will be interesting to see whether a Texas court chooses to follow Delaware’s analytical framework—or instead declines to engage in similar judicial scrutiny,” said Cunningham. “The outcome could influence how other companies weigh the relative merits of Delaware versus Texas as a corporate home.”

Investors react to Musk’s comp

Tesla has a veritable army of engaged individual retail investors, and many support Musk and have voted in favor of his comp plan twice now, getting it over the line with more than majority support.

However, some pension fund leaders who oversee retiree assets invested in Tesla stock have been less than thrilled about Musk’s new award.

“A $29 billion compensation package for any CEO, let alone one who has been largely absent from their daily responsibilities as sales and stock value continue to fall short of investor expectations, is obscene,” said New York City Comptroller Brad Lander in a statement.

Lander said Tesla’s board is enriching Musk at investors’ expense, “once again.”

Illinois State Treasurer Michael Frerichs told Fortune a $29 billion comp package is “egregious on its face.”

“But in light of Elon Musk’s inattention to the day-to-day needs of Tesla, and the company’s worse than expected stock value, the package suggests a board out of step with their responsibilities to investors,” Frerichs wrote in a statement. “With revenues falling short of expectations, the board should be less concerned with paying fealty to a greedy CEO than with long-term planning for the success of the company. Shareholders should demand better corporate governance.”

SOC Investment Group, which represented a group of investors with nearly 8 million shares invested in Tesla, told Fortune in a statement that today’s announcement included a striking admission from the board. “Even an additional $24B in equity might not motivate Elon Musk to stay for two more years, let alone ensure that he devote sufficient time and attention to turn around the currently slumping sales,” SOC wrote.