The Tesla (TSLA) board of directors has collectively earned more than $3 billion through stock awards, a staggering sum that far exceeds the compensation packages given to their peers at rival Magnificent Seven technology firms. Key directors like Elon Musk‘s brother Kimbal Musk (nearly $1 billion since 2004) and director Ira Ehrenpreis ($869 million since 2007) reaped enormous windfalls, despite the board suspending new pay awards since 2021 to settle a shareholder lawsuit alleging excessive compensation.
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An analysis by Equilar found that between 2018 and 2020, the average Tesla director received about $12 million in compensation, which was roughly eight times the average paid at Alphabet (GOOGL), the next highest-paid firm in the Magnificent Seven over that period. Even including four years of suspended pay (2021–2024), Tesla directors’ average pay was still two-and-a-half times that of Meta (META) directors, the next highest-paid.
Tesla Uses Stock Options to Compensate Its Board
Tesla is almost unparalleled among Big Tech in using stock options instead of shares to compensate the board. This is a rare practice that is usually criticized by corporate-governance specialists. Stock options grant the right to buy stock at a preset price, meaning directors face no downside risk. If the stock price falls, they simply do not exercise the option.
Governance experts argue that paying directors in options, which “tend to magnify returns dramatically,” undermines the directors’ independence in overseeing CEO Elon Musk. The huge payout creates an incentive structure where board members, particularly those whose wealth is dominated by Tesla stock like Chair Robyn Denholm, may be reluctant to challenge management for fear of losing their position and future earnings.
Board Continues Extreme Pay Practices Despite Lawsuits
The extraordinary board compensation has already been cited in legal rulings against the company. A Delaware court last year invalidated Musk’s 2018 pay package (worth $132 billion today), finding that the board members’ “excessive compensation and personal ties to Musk compromised CEO-pay negotiations”.
Despite this ruling and the shareholder lawsuit, the board continues its extreme pay practices toward Musk. They recently proposed a new compensation package that could grant Musk as much as $1 trillion in Tesla stock over the next decade, with Denholm leading public campaigns warning shareholders that Musk might leave if the record-setting package is not approved. As one governance expert put it, there is no rationale for this level of pay: “What makes Tesla directors so special?”.
Is Tesla a Buy, Hold, or Sell?
Tesla (TSLA) currently holds a “Hold” consensus rating from Wall Street, a reflection of the deep division surrounding the stock. The ratings breakdown shows that 12 analysts recommend a Buy, 12 suggest a Hold, and nine advise a Sell. Based on 33 analysts’ 12-month price targets, the average 12-month TSLA forecast sits at $386.42, which represents a potential 18.91% downside from the last price.
