Tesla's net $23.7 billion stock grant: legal loopholes, accounting twists, and the Tornetta appeal
A deep dive into the unusual 2025 CEO award, its Nasdaq compliance questions, conflicted board dynamics, and how an appeal could trigger - or erase - billions in compensation.
On August 3, 2025, Tesla announced that a Special Committee, consisting of two independent directors, recommended – and the Board approved - a grant of $96 million restricted stock units (RSUs) to CEO Elon Musk. Tesla called the grant the “2025 CEO Interim Award”, since it is intended to replace his previous pay plan that was invalidated by a Delaware judge in the Tornetta case and to retain Musk who has again threatened to leave the company if his ownership stake was not increased.
Before we get into the accounting for the 2025 award and what happens to the prior 2018 pay package, we have to highlight the strangeness of the 2025 award and how it was granted.
University of Colorado law professor Professor Ann Lipton discussed the new pay package with Mike Levin on their Shareholder Primacy podcast on August 6. She commented that the grant itself may not even be kosher per Nasdaq listing rules. That’s because they are claiming it is not a new grant but, instead, was granted under a 2019 plan that was strictly for all employees except Musk. As a result, a new shareholder approval vote is not needed because the 2019 plan was already voted on. Listen here for more details.
We asked Professor Lipton about the prospects for the appeal of Tornetta case in the Delaware Supreme Court and she said Musk's lawyers are also making the "spurious argument that changes in Delaware law that post-date the decision should influence the outcome."
Francine also wonders if it's conflicted for Musk to now be granted RSU's under a plan that was originally supposed to be for all other employees except Musk. Why is that? In this new grant the two independent board members decided to directly award Musk under the 2019 plan, with no shareholder vote and no new performance conditions. In the past Musk was the executive that decided who to grant options to under the 2019 plan and was the executive ultimately responsible for the financial statements that recorded any accounting for any stock compensation expense accounting under the plan.
For more on this inherent conflict, read this (paywall removed).
The details
The new 2025 $96 million RSUs award to Musk has a two-year vesting cliff, meaning that all RSUs are vested after two years, in early August 2027, contingent on two conditions:
A service condition, and
A "no double-dip" performance condition.