Tesla Board has a new plan to resolve all uncertainty around Elon Musk's future as Tesla CEO

Tesla board is reportedly looking to offer a fresh package of stock options to CEO Elon Musk. According to a report by Financial Times, the company’s board has formed a special committee to review Musk’s compensation. Quoting sources familiar with the matter, the report said that the committee comprises board chair Robyn Denholm and director Kathleen Wilson-Thompson. The existence of the special committee was disclosed in a SEC filing for the quarterly period ended March 31, 2025. It said:“Additionally, the Company’s Board of Directors has established a Special Committee to consider certain compensation matters involving Mr. Musk.”Along with Musk’s pay package, the committee will also “explore alternative ways to compensate him for past work should Tesla fail to reinstate his record 2018 pay deal via an appeal at the Delaware Supreme Court this year,” the report says. “The committee is still in the early stages of deliberation and neither a new package nor any decision on how Musk’s new pay would be structured is guaranteed,” the source told the publication.Tesla and CEO Elon Musk have been involved in a legal dispute for seven years in Delaware over Musk’s pay package. Elon Musk's 2018 compensation package included 304 million stock options. It was a performance-based deal, meaning Musk would receive stock options based on Tesla's stock price and performance meeting specific targets. The CEO became eligible to exercise all the options in 2023 after meeting a series of aggressive valuation and financial performance goals set by the company.At the time of the court ruling in early 2024, these options were worth about $56 billion. Their value later peaked at $146 billion in December and currently stands at around $98 billion based on Tesla’s share price.In January 2024, Delaware judge Kathaleen McCormick cancelled the deal, saying the amount was too large and that Tesla's board members were too influenced by Musk. She said they acted “like supine servants of an overweening master.”In 2024, Musk has threatened to leave Tesla unless he is given more control over the company.Any new compensation package for Elon Musk would now fall under Texas law, as Tesla shifted its headquarters to the state last year. To address this, the FT reports says that the special committee has brought in a new legal adviser, McDermott Will & Emery, which specializes in Texas corporate law. Previously, the board worked with Sidley Austin, a Delaware-based firm.The committee is also grappling with how to grant Musk additional stock options if the original 2018 package is not reinstated through the ongoing appeal. According to the report, reissuing the options could create significant financial and tax challenges. For Tesla, it would mean booking an accounting charge of more than $50 billion. For Musk, accepting the reissued options could result in a 57% tax rate, since the performance goals tied to the options have already been met, making them “in the money.”