filings.toolsItem 11. EXECUTIVE COMPENSATION
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Item 11. EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The following discussion and analysis of compensation arrangements of our named executive officers for 2024 should be read together with the compensation tables and related disclosures set forth below. This discussion contains forward-looking statements that are based on our current considerations, expectations and determinations regarding future compensation programs. The actual amount and form of compensation and the compensation programs that we adopt may differ materially from current or planned programs as summarized in this discussion.
The following discussion and analysis relates to the compensation arrangements for 2024 of (i) our principal executive officer, (ii) our principal financial officer, (iii) the most highly compensated person, other than our principal executive officer and principal financial officer, who was serving as executive officer at the end of our fiscal year ended December 31, 2024 and (iv) our former Senior Vice President, Powertrain and Energy Engineering, who served in such capacity during part of 2024 (our “named executive officers”). We had no other executive officers serving at the end of our fiscal year ended December 31, 2024. Our named executive officers for fiscal year 2024 were:
| Name | Position | |
| Elon Musk | Technoking of Tesla and Chief Executive Officer | |
| Vaibhav Taneja | Chief Financial Officer | |
| Tom Zhu | Senior Vice President, APAC | |
| Andrew Baglino | Former Senior Vice President, Powertrain and Energy Engineering |
Mr. Baglino departed Tesla in April 2024.
Overview and Fiscal Year 2024 Company Highlights
Our current executive compensation program, which was developed and approved by the Compensation Committee, generally consists of base salary and equity-based incentives, as well as other benefits generally available to employees. We combine these elements in order to formulate compensation packages with the goal of providing, on a total basis, competitive pay and aligning the interests of our named executive officers with long-term shareholder interests by tying the value of their compensation to our long-term stock price and/or the achievement of financial, operational and strategic objectives. In 2024, Tesla’s full-year accomplishments under our executive leadership included the following:
| · | Model Y was the best-selling vehicle, of any kind, globally for the full year 2024; |
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| · | Reached lowest average cost of goods per vehicle ever at less than $35,000; |
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| · | 31.4 gigawatt hours of energy storage, representing an increase of 113.3%, compared to the prior year, and the completion of construction of Megafactory Shanghai; and |
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| · | Further improvements and deployment of our FSD (Supervised) capabilities, including through increased AI training compute by over 400% in 2024 and the introduction of our purpose-built Robotaxi product, Cybercab. |
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Compensation Philosophy
Our mission is to accelerate the world’s transition to sustainable energy. This is a long-term mission, and our compensation programs reflect this — and our startup origins — in that they consist primarily of salary or wages and equity awards. Whereas salary or wages are intended to meet our employees’ near-term liquidity needs, we believe that equity awards are an effective tool for retaining employees long-term, as they vest incrementally over a period of time or upon the achievement of specified performance milestones intended to be achieved over the medium- and long-term. During periods in which our stock price and the underlying value of equity awards increase, their retention impact is even greater. We believe that the potential for such increases also creates an ownership culture that promotes holding equity, which in turn aligns the interests of our employees with the long-term interests of our shareholders. Additionally, this compensation philosophy further allows our employees to grow their skill sets and contributions consistent with our long-term mission. For these reasons, our goal is to provide each employee with the opportunity to participate in our equity programs, with certain cash-based bonus programs serving generally to accommodate specific incentive structures or liquidity needs. In light of these considerations, we generally do not make annual grants of equity awards to our senior executives, including our named executive officers, and instead grant equity awards from time to time based upon individual roles and contributions and the retentive impact of currently outstanding equity awards. By combining salary or wages and our equity award program, we strive to offer a total level of compensation that is competitive within specific roles and geographical markets.
In particular, we believe that compensation for the individuals who are responsible for Tesla’s strategic direction and operations should motivate them to achieve sustainable shareholder value and/or tangible milestones rather than to simply remain at Tesla or maintain the status quo. Therefore, while we offer to our general employee population restricted stock units that will retain some value even if the market value of our stock decreases, when grants are made to executive officers those grants generally comprise stock option awards, which have zero initial value and accumulate value, if at all, only to the extent that our stock price increases following their grant, through the applicable vesting dates and until such stock options are ultimately exercised and the underlying shares are sold. In addition, because equity awards comprise a greater proportion of our executive officers’ total level of compensation compared to comparable roles at peer companies, a sustained decrease in our stock price or failure to achieve the applicable operational milestones may result in a level of total compensation that is significantly less than that of such peer roles. Likewise, our outside director compensation program has been comprised primarily of equity awards that are entirely in the form of stock option awards, as well as relatively modest cash retainer payments that may be waived at the election of each director. Each director determined to forego all cash retainer payments in 2024.
We evaluate our compensation philosophy and programs regularly and evolve them as circumstances merit with oversight by the Compensation Committee, particularly with respect to executive and director compensation. For example, if our stock price experiences significant movement over a short period of time that results in a persistent change to equity compensation, certain adjustments may be considered to align our compensation programs to their intended purposes.
In 2024, we reviewed our compensation programs with respect to our senior executives to align our compensation programs to their intended purposes, including striving to offer a total level of compensation that reflects individual performance to be competitive within specific roles and geographical markets and to provide appropriate retentive impact in light of currently outstanding equity awards. Following this review, in October 2024, the Compensation Committee, in consultation with its compensation consultant and our Chief Executive Officer, adjusted base salaries and/or granted equity awards to certain senior executives, which included Mr. Taneja, one of our named executive officers, whose compensation had not been adjusted since he was promoted to the role of Chief Financial Officer in August 2023, as described below.
Additionally, the Company’s Board of Directors has established a Special Committee to consider certain compensation matters involving Mr. Musk.
Key Factors in Determining Executive Compensation
Role of Compensation Committee in Executive Compensation
The Compensation Committee has overall responsibility for recommending to the Board the compensation of our Chief Executive Officer and reviewing and determining the compensation of our other executive officers. Members of the Compensation Committee are appointed by the Board. Currently, the Compensation Committee consists of three members of the Board: Ira Ehrenpreis (Chair), Robyn Denholm and Kathleen Wilson-Thompson, none of whom is an executive officer of Tesla, and each of whom qualifies as an “independent director” under the Nasdaq Stock Market Rules and is deemed independent under all applicable requirements of the Securities and Exchange Commission and Tesla’s Corporate Governance Guidelines, which follow the Nasdaq framework for the determination of independence.
Role of Compensation Consultants
The Compensation Committee has the authority to engage, and has from time to time engaged, the services of outside consultants to assist in making decisions regarding the establishment of Tesla’s compensation philosophy and programs, including for executives and directors. In 2024, Compensia, Inc., a national consulting firm (“Compensia”) was retained as a compensation consultant to advise the Compensation Committee with respect to Tesla’s executive compensation program.
Role of Executive Officers in Compensation Decisions
Historically, for executive officers other than our Chief Executive Officer, the Compensation Committee has sought and considered input from our Chief Executive Officer regarding such executive officers’ responsibilities, performance and compensation. Specifically, our Chief Executive Officer recommends base salary increases and equity award levels for our senior personnel, and advises the Compensation Committee regarding the compensation program’s ability to attract, retain and motivate executive talent. These recommendations reflect compensation levels that our Chief Executive Officer believes are qualitatively commensurate with an executive officer’s individual qualifications, experience, responsibility level, functional role, knowledge, skills and individual performance, as well as Tesla’s performance. The Compensation Committee considers our Chief Executive Officer’s recommendations, but ultimately determines compensation in its judgment and approves the compensation for all of our executive officers (other than for our Chief Executive Officer, the compensation for whom is recommended by the Compensation Committee to, and ultimately approved by, the Board).
The Compensation Committee meets regularly in executive session. Our Chief Executive Officer is not present during Compensation Committee deliberations or votes on his compensation and also recuses himself from sessions of the Board where the Board acts on the Compensation Committee’s recommendations regarding his compensation. In addition, the Board has established a management committee under the Tesla, Inc. 2019 Equity Incentive Plan (the “Equity Award Committee”) to grant and administer equity awards, subject to certain limitations, such as, among other things, maximum limits on the seniority of personnel to whom the Equity Award Committee may grant awards and the value of any individual award. For example, the Equity Award Committee is not authorized to grant awards to employees at or above the level of vice president. Moreover, pursuant to applicable law, the Equity Award Committee may not grant awards to its members, and the number of shares of our common stock underlying awards granted by it may not exceed amounts determined by the Board from time to time. The Board has delegated to the Compensation Committee oversight authority over the Equity Award Committee.
Role of Shareholder Say-on-Pay Votes
At our 2024 annual meeting, our shareholders overwhelmingly approved the compensation of our named executive officers, with approximately 79% of our shareholders present and entitled to vote at the meeting voting in favor of our compensation policies for our named executive officers. Given these results, the Compensation Committee has decided to retain our overall approach to executive compensation while continuing to evaluate our practices.
At the 2023 annual meeting of shareholders, our shareholders indicated a preference for an annual shareholder advisory vote on the compensation of our named executive officers. Consistent with the results of the shareholder vote, we intend to hold a shareholder advisory vote on executive compensation every year until the next vote on the frequency of shareholder advisory votes on executive compensation. We are required to hold a “say on frequency” vote at least every six years regarding how often to hold a shareholder advisory vote on the compensation of our named executive officers.
Clawback Policy
We maintain a clawback policy for compliance with the Nasdaq listing standards and Section 10D of the Exchange Act. This clawback policy applies to current and former executive officers in the event that the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under securities laws; misconduct on the part of the executive is not required. Under this clawback policy, we are required to recoup incentive-based compensation (as that term is defined in Section 10D of the Exchange Act) erroneously received within the three completed fiscal years immediately preceding the date on which we are required to prepare an accounting restatement.
Our Corporate Governance Guidelines also sets forth a compensation recovery (“clawback”) policy with respect to our executive officers. Moreover, the terms of the performance-based stock option award granted to Elon Musk in January 2018 (the “2018 CEO Performance Award”) include a clawback provision in the event of a restatement of our financial statements previously filed with the SEC. See “Compensation Discussion and Analysis—Chief Executive Officer Compensation—2018 CEO Performance Award” under this Item 11 below.
Current Elements of Named Executive Officer Compensation
Base Salary
The Compensation Committee is responsible for reviewing our Chief Executive Officer’s and other executive officers’ base salaries. The base salaries of all executive officers are reviewed and adjusted when necessary to reflect individual roles, performance and the competitive market. Because we currently do not provide cash bonuses to our executive officers, salary is the primary cash-based element of our executive officers’ compensation structure.
In connection with the 2024 review of our compensation programs discussed in “Compensation Philosophy” above, the Compensation Committee increased Mr. Taneja’s base salary to reflect his promotion in August 2023 to the role of Chief Financial Officer. Mr. Zhu’s base salary decreased in 2024 as compared to 2023 due to certain geographic considerations that arose in 2023 when he was on assignment from Gigafactory Shanghai. The following table sets forth information regarding the annualized base salary rates at the end of 2024 for our named executive officers:
| Ending Fiscal 2024 | ||||
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| Name | Base Salary($)(1) | |||
| Elon Musk | — | (2) | ||
| Vaibhav Taneja | 400,000 | |||
| Tom Zhu | 350,000 | |||
| Andrew Baglino | — | (3) |
| (1) | Reflects an annualized rate assuming 52 weeks each comprised of five work days. Mr. Taneja’s base salary was adjusted in October 2024. |
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| (2) | Mr. Musk historically earned a base salary that reflected the applicable minimum wage requirements under California law, and he was subject to income taxes based on such base salary. However, he has never accepted his salary. Commencing in May 2019 at Mr. Musk’s request, we eliminated altogether the earning and accrual of this base salary. |
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| (3) | Mr. Baglino departed Tesla in April 2024. His annualized base salary rate at his time of departure was $300,000. |
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Equity-Based Incentives
Our equity award program is the primary vehicle for offering long-term incentives to our named executive officers. The equity awards we have historically granted and currently grant are options to purchase shares of our common stock and restricted stock unit awards that are settled in shares of our common stock upon vesting. We have granted to our named executive officers both awards that vest over a long-term period and awards that vest only upon the achievement of specified Tesla performance milestones, in each case subject to continued service. We emphasize the grant of stock option awards for our named executive officers, which have value only to the extent, if any, that our stock price increases following their grant. Accordingly, since 2020, equity awards granted to our named executive officers have primarily been in the form of stock options: Mr. Zhu, our Senior Vice President, APAC, received 100% of his equity award as stock options upon his promotion to such role in 2023, and Mr. Taneja, our Chief Financial Officer, received approximately 80% of his equity award as stock options in 2024, following the 2024 review of our compensation programs discussed in “Compensation Philosophy” above and in consideration of his promotion in August 2023 to the role of Chief Financial Officer. As a result, a significant portion of our named executive officers’ total compensation is entirely at risk, depending on long-term stock price performance.
While we strive to offer a total level of compensation that is competitive within specific roles and geographical markets, we do not have a rigid set of criteria for granting equity awards; instead, the Compensation Committee exercises its judgment and discretion, in consultation with our Chief Executive Officer and from time to time, a compensation consultant (other than with respect to decisions pertaining to the Chief Executive Officer’s compensation). To determine the form and amount of equity awards previously granted to named executive officers, the Compensation Committee considers, among other things, the role and responsibility of the named executive officer, competitive market factors, equity awards previously granted to the named executive officer, the impact of any dramatic changes in our stock price over a short period of time and the cash-based compensation received by the named executive officer. We generally grant one-time new hire equity awards to our employees, including executives, upon their commencement of employment with us, or upon their promotion to a new position. Additionally, as part of our ongoing executive compensation review and alignment process, we have periodically granted additional equity awards to our executives.
The Compensation Committee granted an equity award to Mr. Taneja in October 2024, following the 2024 review of our compensation programs discussed in “Compensation Philosophy” above and considering his promotion in August 2023 to the role of Chief Financial Officer. Approximately 80% of Mr. Taneja’s equity award was granted as stock options and 20% of the award was granted as restricted stock units. See “Grants of Plan-Based Awards in 2024” and “Executive Compensation— Outstanding Equity Awards at 2024 Fiscal Year-End” under this Item 11 below for a description of the equity awards granted to Mr. Taneja. The Compensation Committee did not grant any equity awards in 2024 to our other named executive officers, including our Chief Executive Officer.
The Compensation Committee meets periodically, including to approve equity award grants to our executives from time to time. We do not have, nor do we plan to establish, any program, plan or practice to time equity award grants in coordination with releasing material non-public information, and the Compensation Committee does not take material non-public information into account when determining the timing and terms of equity awards. Tesla has not timed the disclosure of material non-public information to affect the value of executive compensation. During 2024, there were no stock options granted to any named executive officer within four business days preceding, or within one business day after, the filing of any report on Forms 10-K, 10-Q or 8-K that discloses material non-public information.
Severance and Change in Control Benefits
No named executive officer has a severance or change in control arrangement with Tesla.
Bonus
We do not currently have or have planned, and historically we have rarely entered into, any specific arrangements with our named executive officers providing for cash-based bonus awards.
Non-Equity Incentive Plan Compensation
We did not provide any non-equity incentive plan compensation to any of our named executive officers in 2024, and we do not currently have or have planned any specific arrangements with our named executive officers providing for non-equity incentive plan compensation.
Perquisites
Generally, we do not provide any perquisites or other personal benefits to our named executive officers which are not offered on a non-discriminatory basis to all employees as well.
Health and Welfare Benefits
We provide the following benefits to our named executive officers on the same basis provided to all of our employees:
| · | medical insurance including comprehensive transgender and fertility coverage, mental health, dental and vision; |
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| · | adoption and surrogacy benefits; |
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| · | confidential Employee Assistance Program counseling; |
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| · | life insurance and accidental death and dismemberment insurance; |
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| · | a Section 401(k) plan where Tesla will provide a company match equal to 50% of the employee’s contribution, up to a maximum of 3% of the employee’s eligible compensation with a $3,000 annual cap; |
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| · | an employee stock purchase plan; |
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| · | short-and long-term disability insurance; |
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| · | medical and dependent care flexible spending account; and |
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| · | a health savings account. |
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Chief Executive Officer Compensation
Overview
Historically, in developing compensation recommendations for our Chief Executive Officer, the Compensation Committee has sought both to appropriately reward our Chief Executive Officer’s previous and current contributions and to create incentives for our Chief Executive Officer to continue to contribute significantly to successful results in the future. Each of the 2018 CEO Performance Award and the performance-based stock option award granted to our Chief Executive Officer in August 2012 (the “2012 CEO Performance Award”) was focused on this latter objective, as it solely rewards future performance.
In addition to serving as our Chief Executive Officer since October 2008, Elon Musk has contributed significantly and actively to us since our earliest days in April 2004 by recruiting executives and engineers, contributing to vehicle engineering and design, raising capital for us, bringing investors to us and raising our public awareness.
Cash Compensation
Mr. Musk historically earned a base salary that reflected the applicable minimum wage requirements under California law, and he was subject to income taxes based on such base salary. However, he has never accepted his salary. Commencing in May 2019 at Mr. Musk’s request, we eliminated altogether the earning and accrual of this base salary.
Historical Equity Compensation
Prior to the stock option awards granted in December 2009, Mr. Musk did not receive any equity compensation for his services for a period of five years.
In 2010 and 2011, Mr. Musk did not receive any equity grants, because the Compensation Committee believed his grants made in December 2009 already provided sufficient motivation for Mr. Musk to perform his duties as Chief Executive Officer.
In August 2012, to create incentives for continued long-term success from the then-recently launched Model S program as well as from Tesla’s then-planned Model X and Model 3 programs, and to further align executive compensation with increases in shareholder value, the Board granted to Mr. Musk the 2012 CEO Performance Award, comprised of a stock option award to purchase 79,123,515 shares (as adjusted for the 2020 Stock Split and 2022 Stock Split) of Tesla’s common stock, representing 5% of Tesla’s total issued and outstanding shares at the time of grant. The 2012 CEO Performance Award consisted of 10 equal vesting tranches, each requiring that Tesla meet a combination of (i) the achievement of a specified operational milestone relating to development of Model X or Model 3, aggregate vehicle production or a gross margin target, and (ii) a sustained incremental $4 billion increase in Tesla’s market capitalization from $3.2 billion, Tesla’s market capitalization at the time of grant. Prior to its expiration in 2022, the market capitalization conditions for all of the 10 vesting tranches and nine of the 10 operational milestones had been achieved, and nine of 10 tranches under the 2012 CEO Performance Award vested.
Prior to 2018, the only additional equity awards received by Mr. Musk related to certain immaterial awards granted during 2013 pursuant to a patent incentive program that was available to our employees generally.
2018 CEO Performance Award
Early in 2017, with the 2012 CEO Performance Award heading to substantial completion after having helped Tesla grow its market capitalization to over $55 billion in just over five years, the independent members of the Board began preliminary discussions regarding how to continue to incentivize Mr. Musk to lead Tesla through the next phase of its development. In January 2018, following more than six months of careful analysis and development led by the Compensation Committee, with participation by every independent Board member, the help of Compensia and engagement with and feedback from our largest institutional shareholders, the Board granted the 2018 CEO Performance Award to Mr. Musk. Such grant was subject to approval by a majority of the total votes of Tesla common stock not owned by Mr. Musk or Kimbal Musk cast at a meeting of the shareholders to approve the 2018 CEO Performance Award. On March 21, 2018, such approval was obtained, with approximately 73% of the votes cast by such disinterested shares voting in favor of the 2018 CEO Performance Award.
The 2018 CEO Performance Award was comprised of a 10-year maximum term stock option to purchase 303,960,630 shares (as adjusted for the 2020 Stock Split and 2022 Stock Split) of Tesla’s common stock, divided equally among 12 separate tranches that were each equivalent to 1% of the issued and outstanding shares of Tesla’s common stock at the time of grant, at an exercise price of $23.34 per share (as adjusted for the 2020 Stock Split and 2022 Stock Split). Each of the 12 tranches of the 2018 CEO Performance Award vested upon certification by the Board that both (i) the market capitalization milestone for such tranche, which began at $100 billion for the first tranche and increased by increments of $50 billion thereafter and (ii) any one of the following eight operational milestones focused on revenue or eight operational milestones focused on profitability, was met:
| Total Revenue* | Adjusted EBITDA** | |||
|---|---|---|---|---|
| (in billions) | (in billions) | |||
| $20.0 | $1.5 | |||
| $35.0 | $3.0 | |||
| $55.0 | $4.5 | |||
| $75.0 | $6.0 | |||
| $100.0 | $8.0 | |||
| $125.0 | $10.0 | |||
| $150.0 | $12.0 | |||
| $175.0 | $14.0 |
* “Revenue” means total revenues as reported in Tesla’s financial statements on Forms 10-Q or 10-K filed with the SEC for the previous four consecutive fiscal quarters.
** “Adjusted EBITDA” means (i) net income (loss) attributable to common shareholders before (ii) interest expense, (iii) (benefit) provision for income taxes, (iv) depreciation and amortization, and (v) stock-based compensation, as each such item is reported in Tesla’s financial statements on Forms 10-Q or 10-K filed with the SEC for the previous four consecutive fiscal quarters.
Any single operational milestone could only satisfy the vesting requirement of one tranche, together with the corresponding market capitalization milestone. Subject to any applicable clawback provisions, policies or other forfeiture terms, once a milestone was achieved, it was forever deemed achieved for purposes of determining the vesting of a tranche. Meeting more than 12 of the 16 operational milestones does not result in any additional vesting or other compensation to Mr. Musk under the 2018 CEO Performance Award. Except in a change in control situation, measurement of the market capitalization milestones was based on both (i) a six calendar month trailing average of Tesla’s stock price as well as (ii) a 30 calendar day trailing average of Tesla’s stock price, in each case based on trading days only. Upon the consummation of certain acquisitions or split-up, spin-off or divestiture transactions, each then-unachieved market capitalization milestone and/or operational milestone would have been adjusted to offset the impact of such transactions to the extent they had been considered material to the achievement of those milestones.
In establishing the Revenue and Adjusted EBITDA milestones, the Board carefully considered a variety of factors, including Tesla’s growth trajectory and internal growth plans and the historical performance of other high-growth and high-multiples companies in the technology space that have invested in new businesses and tangible assets. These benchmarks provided revenue/EBITDA to market capitalization multiples, which were then used to inform the specific operational targets that aligned with Tesla’s plans for future growth. Nevertheless, the Board considered each of the market capitalization and operational milestones to be challenging hurdles. For example, in order to meet all 12 market capitalization milestones, Tesla was required to add approximately $600 billion to its market capitalization at the time of the grant of the 2018 CEO Performance Award on a sustained basis, and in order to satisfy all eight revenue-based operational milestones, Tesla would have to increase revenue by more than $163 billion from its annual revenue of approximately $11.8 billion in 2017, the last fiscal year completed prior to the grant of the 2018 CEO Performance Award.
In addition, Mr. Musk was required to continue leading Tesla as our Chief Executive Officer or, alternatively, as our Chief Product Officer and Executive Chairman (with any other Chief Executive Officer reporting directly to him), at the time each milestone is met in order for the corresponding tranche to vest. With limited exceptions, Mr. Musk must hold any shares that he acquires upon exercise of the 2018 CEO Performance Award for at least five years post-exercise. There would have been no acceleration of vesting of the 2018 CEO Performance award upon Mr. Musk’s termination, death or disability or a change in control of Tesla. However, in a change in control situation, the achievement of the milestones would have been based solely on the market capitalization milestones, with the measurement of Tesla’s market capitalization determined by the product of the total number of outstanding shares of Tesla common stock immediately before the change in control multiplied by the greater of the last closing price of a share of Tesla common stock before the effective time of the change in control or the per share price (plus the per share value of any other consideration) received by Tesla’s shareholders in the change in control.
In the event of a restatement of Tesla’s financial statements previously filed with the SEC, if a lesser portion of the 2018 CEO Performance Award would have vested based on the restated financial results, then Tesla will require forfeiture (or repayment, as applicable) of the portion of the 2018 CEO Performance Award that would not have vested based on the restated financial results (less any amounts Mr. Musk may have paid to Tesla in exercising any forfeited awards). The 2018 CEO Performance Award is subject, if more stringent than the foregoing, to any current or future Tesla clawback policy applicable to equity awards, provided that the policy does not discriminate solely against Mr. Musk except as required by applicable law.
As of the date of this filing, all of the milestones have been achieved and certified by our Board. Consequently, all 12 of the 12 tranches under the 2018 CEO Performance Award, corresponding to options to purchase an aggregate 303,960,630 shares of Tesla’s common stock, have vested and become exercisable, subject to Mr. Musk’s payment of the exercise price of $23.34 per share and the minimum five-year holding period generally applicable to any shares he acquires upon exercise.
Realized Compensation
For purposes of the table in “Summary Compensation Table” under this Item 11 below, we are required to report pursuant to applicable SEC rules any stock option grants to Mr. Musk at values determined as of their respective grant dates and which are driven by certain assumptions prescribed by Financial Accounting Board Accounting Standards Codification Topic 718, “Compensation–Stock Compensation” (“ASC Topic 718”). Moreover, we are required to report in “Pay Ratio Disclosure” under this Item 11 below (i) Mr. Musk’s annual total compensation, (ii) the median of the annual total compensation of all Tesla employees qualifying for this analysis, other than Mr. Musk, in each case calculated pursuant to the methodology used for the table under “Summary Compensation Table,” and (iii) the ratio of the former to the latter.
In addition, we are required to report in “2024 Option Exercises and Stock Vested” under this Item 11 below an amount for the “value realized” upon: (i) any exercise by Mr. Musk of a stock option, which is based on the difference between the market price of the underlying shares at the time of exercise and the exercise price of the stock option, and (ii) any vesting of a restricted stock unit award, based on the market price of the award at the time of vesting. Such amount is required to be reported even if Mr. Musk does not actually receive any cash from such exercise or vesting, either because he does not also sell any shares or because he sells only a number of shares sufficient to cover the related tax liabilities resulting from the exercise or vesting.
As a result, there may be a significant disconnect between what is reported as compensation for Mr. Musk in a given year in such sections and the value actually realized as compensation in that year or over a period of time. Moreover, the vast majority of compensation in respect of past stock option grants to Mr. Musk, including the 2012 CEO Performance Award and the 2018 CEO Performance Award, were structured to be incentives for future performance with their value realizable only if Tesla’s stock price appreciated compared to the dates of the grants, and if the Company achieved applicable vesting requirements.
To supplement the disclosures in “Summary Compensation Table,” “Pay Ratio Disclosure” and “2024 Option Exercises and Stock Vested” under this Item 11 below, we have included the following table, which shows the total realized compensation of Mr. Musk for the last three fiscal years, as well as the ratio of Mr. Musk’s realized compensation to the median of the annual total compensation of all other Tesla employees qualifying for this analysis as reported under “Pay Ratio Disclosure.” Realized compensation is not a substitute for reported compensation in evaluating our compensation structure, but we believe that realized compensation is an important factor in understanding that the value of compensation that Mr. Musk ultimately realizes is dependent on a number of additional factors, including: (i) the vesting of certain of his option awards only upon the successful achievement of a number of market capitalization increase and operational milestone targets; (ii) the fact that Mr. Musk does not receive any cash if he does not actually sell shares and thereby reduce his investment in us, and he does not receive any cash to the extent that he sells only shares sufficient to cover income taxes with respect to his awards (including stock options exercised solely to avoid their expiration in accordance with their terms); and (iii) the then-current market value of our common stock at the times at which Mr. Musk may elect to actually sell his shares.
| Median Annual Total | Ratio of Total CEO | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| “Value Realized on Exercise | Compensation of all | Realized | |||||||||||||||||||
| “Total Compensation” of | or Vesting of Awards” of | Qualifying Non-CEO | Compensation to | ||||||||||||||||||
| CEO, | CEO, as | Employees, | Median Annual | ||||||||||||||||||
| as Reported in Summary | Reported in Option Exercises | as reported in Pay | Total CEO | Total | |||||||||||||||||
| Compensation Table | and Stock Vested Table | Ratio Disclosure | Realized | Compensation of | |||||||||||||||||
| Below | Below | Section Below | Compensation | all Qualifying Non-CEO | |||||||||||||||||
| Year | ($) | ($) | ($) | ($)(1) | Employees | ||||||||||||||||
| 2024 | — | — | 57,243 | — | 0.00:1 | ||||||||||||||||
| 2023 | — | 1,861,335 | (2) | 45,811 | — | 0.00:1 | |||||||||||||||
| 2022 | — | — | 34,084 | — | 0.00:1 |
| (1) | “Total CEO realized compensation” for a given year is defined as (i) the amounts reported for Mr. Musk in “Summary Compensation Table” under this Item 11 below under the columns “Salary,” “Bonus,” “Non-Equity Incentive Plan Compensation” and “All Other Compensation,” plus (ii) with respect to any stock option exercised by Mr. Musk in such year in connection with which shares of stock were also sold other than to satisfy any resulting tax liability, the difference between the market price of such shares at the time of exercise and the applicable exercise price of the option, plus (iii) with respect to any restricted stock unit vested by Mr. Musk in such year in connection with which shares of stock were also sold other than automatic sales to satisfy any withholding obligations related to such vesting, the market price of such shares at the time of vesting, plus (iv) any cash actually received by Mr. Musk in respect of any shares sold to cover tax liabilities as described in (ii) and (iii) above, following the payment of such tax liabilities. |
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| (2) | Reflects the exercise of vested stock options granted as part of a company-wide patent incentive program, and which were scheduled to expire in 2023. Mr. Musk paid the exercise price and applicable taxes in cash, and did not sell any of the resulting shares. |
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Tax and Accounting Considerations
Sections 280G and 409A. We have not provided or committed to provide any executive officer or director with a gross-up or other reimbursement for tax amounts the executive might pay pursuant to Section 280G or Section 409A of the Internal Revenue Code (the “Tax Code”). Section 280G and related Tax Code sections provide that executive officers, directors who hold significant shareholder interests and certain other service providers could be subject to significant additional excise taxes if they receive payments or benefits in connection with a change in control of Tesla that exceeds certain limits, and that we or our successor could lose a deduction on the amounts subject to the additional tax. Section 409A also imposes additional significant taxes on the individual in the event that an executive officer, director or service provider of certain types receives “deferred compensation” that does not meet the requirements of Section 409A.
Tax Deduction Limit. Section 162(m) of the Tax Code generally disallows a tax deduction to public corporations for compensation greater than $1,000,000 paid in any fiscal year to certain executive officers. The Compensation Committee has not adopted a formal policy regarding tax deductibility of compensation paid to our executive officers and reserves the right to pay compensation that may not be deductible to Tesla if it determines that doing so would be in the best interests of Tesla.
Accounting Implications. We follow ASC Topic 718 for our stock-based compensation awards. ASC Topic 718 requires companies to measure the compensation expense for all stock-based compensation awards made to employees and directors based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the compensation tables below, even though our named executive officers may never realize any value from their awards. ASC Topic 718 also requires companies to recognize the compensation cost of their stock-based compensation awards in their income statements over the period that an executive officer is required to render service in exchange for the option or other award.
Other Information
On June 4, 2018, a Tesla shareholder filed a shareholder derivative complaint in the Delaware Court of Chancery against Mr. Musk and certain current and former Tesla directors in connection with the Tesla Board’s approval of the 2018 CEO Performance Award. On January 30, 2024, the Court issued a post-trial opinion that granted the plaintiff’s request that the 2018 CEO Performance Award be fully rescinded. In addition, following the recommendation of a special committee of the Board, the Board (with Mr. Musk and Kimbal Musk recusing themselves) determined that the ratification of the 2018 CEO Performance Award was in the best interests of the Company and its shareholders, approved the ratification (the “Ratification”) of the 2018 Performance Award, directed that the Ratification be submitted to the shareholders at the 2024 annual meeting, and recommended that shareholders approve the Ratification. The Ratification was approved by the shareholders at the 2024 annual meeting. Following the Ratification, Tesla requested that the Delaware Court revise its decision to rescind the 2018 CEO Performance Award. On December 2, 2024, the Delaware Court rejected the request to revise its decision. On December 13, 2024, the Delaware Court entered a final judgment rescinding the 2018 CEO Performance Award. Tesla is appealing the Delaware Court’s decision to not recognize the Ratification, its decision to reject the request to revise its decision, and its judgment rescinding the 2018 CEO Performance Award. The current and former Tesla directors are also appealing the Delaware Court’s post-trial decision.
Compensation Committee Report
The Compensation Committee oversees Tesla’s compensation programs, policies and practices. The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on such review and discussions, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this Amendment.
Respectfully submitted by the members of the Compensation Committee of the Board
| Ira Ehrenpreis (Chair) | |
|---|---|
| Robyn Denholm | |
| Kathleen Wilson-Thompson |
This report of the Compensation Committee is required by the SEC and, in accordance with the SEC’s rules, will not be deemed to be part of or incorporated by reference by any general statement incorporating by reference the Original Form 10-K or this Amendment into any filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate this information by reference, and will not otherwise be deemed “soliciting material” or “filed” under either the Securities Act or the Exchange Act.
Summary Compensation Table
The following table presents information concerning the total compensation of our named executive officers for each of the last three fiscal years. No disclosure is provided for fiscal years for which those persons were not named executive officers.
| Non-Equity | ||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Stock | Option | Incentive Plan | All Other | |||||||||||||||||||||||||||||
| Salary | Bonus | Awards | Awards | Compensation | Compensation | Total | ||||||||||||||||||||||||||
| Name and Principal Position | Year | ($) | ($) | ($)(1) | ($)(2) | ($) | ($) | ($) | ||||||||||||||||||||||||
| Elon Musk | 2024 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Technoking of Tesla and | 2023 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Chief Executive Officer | 2022 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Vaibhav Taneja | 2024 | 303,846 | — | 26,136,809 | (3) | 113,029,280 | (3) | — | 3,000 | (4) | 139,472,935 | |||||||||||||||||||||
| Chief Financial Officer | 2023 | 275,000 | — | — | — | — | 3,000 | 278,000 | ||||||||||||||||||||||||
| Tom Zhu | 2024 | 350,000 | — | — | — | — | 168,250 | (5) | 518,250 | |||||||||||||||||||||||
| SVP, APAC | 2023 | 381,009 | — | — | 31,641,961 | — | 545,868 | 32,568,838 | ||||||||||||||||||||||||
| Andrew Baglino | 2024 | 121,620 | (6) | — | — | — | — | 3,000 | (4) | 124,620 | ||||||||||||||||||||||
| Former SVP, Powertrain and | 2023 | 300,000 | — | — | — | — | 3,000 | 303,000 | ||||||||||||||||||||||||
| Energy Engineering | 2022 | 300,000 | — | — | — | — | 3,000 | 303,000 |
| (1) | This column reflects the aggregate grant date fair value computed in accordance with ASC Topic 718 of the restricted stock units granted to the named executive officers. The assumptions used in the valuation of these awards are set forth in Note 12, Equity Incentive Plans, to the consolidated financial statements included in the Original Form 10-K. These amounts do not necessarily correspond to the actual value that may be recognized by the named executive officers, which depends, among other things, on the market value of our common stock appreciating from that on the grant date(s) of the restricted stock units. |
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| (2) | This column reflects the aggregate grant date fair value computed in accordance with ASC Topic 718 of the options to purchase shares of our common stock granted to the named executive officers. The assumptions used in the valuation of these awards are set forth in Note 12, Equity Incentive Plans, to the consolidated financial statements included in the Original Form 10-K. These amounts do not necessarily correspond to the actual value that may be recognized by the named executive officers, which depends, among other things, on the market value of our common stock appreciating from that on the grant date(s) of the option(s). |
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| (3) | Award granted following the 2024 review of our compensation programs discussed in “Compensation Philosophy” and “Equity-Based Incentives” above. |
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| (4) | Reflects matching contributions made under the Tesla 401(k) Plan based on each of the named executive officer’s fiscal 2024 contributions. |
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| (5) | All Other Compensation consists of $165,250 for tax assistance reimbursement payments for 2024 taxes (such payments were made in Chinese yuan and converted to U.S. dollars based on the then prevailing Chinese yuan/U.S. dollar exchange rate on each applicable payment date, which was approximately 0.14) and $3,000 to reflect matching contributions made under the Tesla 401(k) Plan based on Mr. Zhu’s fiscal 2024 contributions. |
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| (6) | Reflects base salary received by Mr. Baglino prior to his departure from Tesla in April 2024. |
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Grants of Plan-Based Awards in 2024
The following table presents information concerning each grant of an award made to a named executive officer in fiscal 2024 under any plan.
| Estimated | Estimated | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Future | Future | ||||||||||||||||||||||||||||||
| Payouts | Payouts | ||||||||||||||||||||||||||||||
| Under | Under | All Other | All Other | ||||||||||||||||||||||||||||
| Non-Equity | Equity | Stock | Option | Exercise or | Grant | ||||||||||||||||||||||||||
| Incentive | Incentive | Awards: | Awards: | Base | Date Fair | ||||||||||||||||||||||||||
| Plan Awards | Plan Awards | Number of | Number of | Price | Closing | Value/ | |||||||||||||||||||||||||
| Threshold | Threshold | Shares of | Securities | of Option | Market | Incremental | |||||||||||||||||||||||||
| Target | Target | Stock or | Underlying | Awards | Price | Fair | |||||||||||||||||||||||||
| Name | Grant Date(1) | Maximum | Maximum | Units | Options | ($/sh) | (if different) | value | |||||||||||||||||||||||
| Vaibhav Taneja | 10/31/2024 | (2) | 1,600 | $ | 249.85 | $ | 192,086 | ||||||||||||||||||||||||
| 10/31/2024 | (2) | 939,887 | $ | 249.85 | $ | 112,837,194 | |||||||||||||||||||||||||
| 10/31/2024 | (2) | 104,610 | $ | 26,136,809 |
| (1) | The vesting schedule applicable to each outstanding award is set forth in “Executive Compensation— Outstanding Equity Awards at 2024 Fiscal Year-End” below. |
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| (2) | Mr. Taneja received approximately 80% of his equity award in the form of stock options and 20% of his equity award in the form of restricted stock units in 2024. The award was granted following the 2024 review of our compensation programs discussed in “Compensation Philosophy” and “Equity-Based Incentives” above. |
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Outstanding Equity Awards at 2024 Fiscal Year-End
The following table presents information concerning unexercised options and unvested restricted stock unit awards for each named executive officer outstanding as of the end of fiscal 2024.
| Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity | |||||||||||||||||||||||||||||||||
| Incentive | |||||||||||||||||||||||||||||||||
| Plan | |||||||||||||||||||||||||||||||||
| Awards: | Number of | Market | |||||||||||||||||||||||||||||||
| Number of | Number of | Number of | Shares or | Value of | |||||||||||||||||||||||||||||
| Securities | Securities | Securities | Units of | Shares or | |||||||||||||||||||||||||||||
| Underlying | Underlying | Underlying | Stock That | Units of Stock | |||||||||||||||||||||||||||||
| Unexercised | Unexercised | Unexercised | Option | Option | Have Not | That Have | |||||||||||||||||||||||||||
| Options (#) | Options (#) | Unearned | Exercise | Expiration | Vested | Not Vested | |||||||||||||||||||||||||||
| Name | Grant Date | Exercisable | Unexercisable | Options (#) | Price ($) | Date | (#) | ($)(1) | |||||||||||||||||||||||||
| Elon Musk | 3/21/2018 | (2) | 303,960,630 | — | — | 23.34 | 1/19/2028 | — | — | ||||||||||||||||||||||||
| Vaibhav Taneja | 10/31/2024 | (3) | 19,614 | 921,873 | — | 249.85 | 10/31/2034 | — | — | ||||||||||||||||||||||||
| 10/31/2024 | (4) | — | — | — | — | — | 98,072 | 39,605,396 | |||||||||||||||||||||||||
| 10/19/2020 | (5) | 154,095 | — | — | 143.61 | 10/19/2030 | — | — | |||||||||||||||||||||||||
| 4/19/2019 | (6) | 764,245 | — | — | 18.22 | 4/19/2029 | — | — | |||||||||||||||||||||||||
| 10/16/2018 | (7) | 10,575 | — | — | 18.44 | 10/16/2028 | — | — | |||||||||||||||||||||||||
| 11/13/2017 | (8) | 13,860 | — | — | 21.03 | 11/13/2027 | — | — | |||||||||||||||||||||||||
| Tom Zhu | 5/19/2023 | (9) | 141,275 | 197,785 | — | 180.14 | 05/19/2033 | — | — | ||||||||||||||||||||||||
| 10/19/2020 | (5) | 616,377 | — | — | 143.61 | 10/19/2030 | — | — | |||||||||||||||||||||||||
| 7/19/2019 | (10) | 373,760 | — | — | 17.22 | 7/19/2029 | — | — | |||||||||||||||||||||||||
| 4/19/2019 | (11) | 486,045 | — | — | 18.22 | 4/19/2029 | — | — | |||||||||||||||||||||||||
| 10/16/2018 | (7) | 155,100 | — | — | 18.44 | 10/16/2028 | — | — | |||||||||||||||||||||||||
| 8/20/2018 | (12) | 295,650 | — | — | 20.57 | 8/20/2028 | — | — | |||||||||||||||||||||||||
| Andrew Baglino (13) | — | — | — | — | — | — | — | — |
| (1) | The market value of unvested restricted stock units is calculated by multiplying the number of unvested restricted stock units held by the applicable named executive officer by the closing price of our common stock on December 31, 2024, which was $403.84. |
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| (2) | 1/12th of the total number of shares subject to the option becomes vested and exercisable each time: (i) our market capitalization increases initially to $100.0 billion for the first tranche, and by an additional $50.0 billion for each tranche thereafter; and (ii) one of 16 specified operational milestones relating to total revenue or adjusted EBITDA (other than any operating milestone that previously counted towards the vesting of another tranche) is attained, subject to Mr. Musk’s continued service to us as either CEO or as both Executive Chairman and Chief Product Officer, with the CEO reporting to him, at each such vesting event. See “Compensation Discussion and Analysis—Chief Executive Officer Compensation—2018 CEO Performance Award” under this Item 11 above. |
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| (3) | 1/48th of the aggregate shares subject to the option became vested and exercisable on December 5, 2024, and 1/48th of the shares subject to the option became vested and exercisable each month thereafter, subject to the grantee’s continued service to us on each such vesting date. |
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| (4) | 1/16th of this award vested on December 5, 2024, and 1/16th this award vests every three months thereafter, subject to the grantee’s continued service to us on each such vesting date. |
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| (5) | 1/48th of the shares subject to the option became vested and exercisable on December 5, 2020, and 1/48th of the shares subject to the option became vested and exercisable every month thereafter. |
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| (6) | 1/8th of the shares subject to the option became vested and exercisable on September 13, 2019, and 1/48th of the shares subject to the option became vested and exercisable each month thereafter. |
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| (7) | 1/60th of the shares subject to the option became vested and exercisable on November 1, 2018, and 1/60th of the shares subject to the option became vested and exercisable each month thereafter. |
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| (8) | 1/24th of the shares subject to the option vested on November 13, 2017 and 1/48th of the shares subject to the option became vested and exercisable each month thereafter. |
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| (9) | 1/48th of the shares subject to the option became vested and exercisable on May 19, 2023, and 1/48th of the shares subject to the option became vested and exercisable each month thereafter, subject to the grantee’s continued service to us on each such vesting date. |
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| (10) | 1/60th of the shares subject to the option became vested and exercisable on July 24, 2019, and 1/60th of the shares subject to the option became vested and exercisable each month thereafter. |
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| (11) | 1/4th of the shares subject to the option each became vested and exercisable upon the Company’s achievement of certain performance objectives set forth in the option agreements. |
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| (12) | With respect to 150,000 shares subject to the option, 1/48th of such shares became vested and exercisable upon the Company’s achievement of certain performance objectives set forth in the option agreements, and 1/48th of the shares became vested and exercisable on each monthly anniversary thereafter, and with respect to 225,000 shares subject to the option, 1/60th of such shares became vested and exercisable on August 20, 2018, and 1/60th of the shares became vested and exercisable each month thereafter. |
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| (13) | Mr. Baglino departed Tesla in April 2024, which led to forfeitures of unvested awards. |
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2024 Option Exercises and Stock Vested
The following table presents information concerning each exercise of stock options and vesting of stock awards during fiscal 2024 for each of the named executive officers.
| Option Awards | Stock Awards | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Number of Shares | Value Realized on | Number of Shares | Value Realized on | |||||||||||||
| Acquired on Exercise | Exercise | Acquired on Vesting | Vesting | |||||||||||||
| Name | (#) | ($)(1) | (#) | ($)(2) | ||||||||||||
| Vaibhav Taneja | 35,000 | 9,653,338 | 6,538 | 2,415,726 | ||||||||||||
| Tom Zhu | — | — | 7,899 | 1,542,701 | ||||||||||||
| Andrew Baglino(3) | 1,162,362 | 98,688,029 | — | — |
| (1) | Reflects the product of the number of shares of stock subject to the exercised option multiplied by the difference between the market price of our common stock at the time of exercise on the exercise date and the exercise price of the option. |
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| (2) | Reflects the product of the number of shares of stock vested multiplied by the market price of our common stock on the vesting date. |
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| (3) | Includes Mr. Baglino’s exercise, in connection with his departure from Tesla in April 2024, of all of his remaining vested options within the period required by the terms and conditions of the applicable award for post-termination exercise. |
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Potential Payments Upon Termination or Change in Control
We do not have an employment agreement for any specific term with any of our named executive officers. Moreover, we do not have any contract, agreement, plan or arrangement that would result in payments to a named executive officer at, following, or in connection with any termination of employment, including resignation, severance, retirement or a constructive termination of employment of a named executive officer, or a change in control of Tesla or a change in the named executive officer’s responsibilities.
Pay Ratio Disclosure
Tesla is committed to fair and competitive compensation for our employees. Moreover, Elon Musk, the Technoking of Tesla and our Chief Executive Officer, has agreed to a compensation arrangement in the 2018 CEO Performance Award that is substantially tied to the appreciation of our market capitalization. Because equity awards are generally made available to Tesla employees, this also means that Mr. Musk’s compensation is tied to the success of Tesla employees. We are providing a ratio of (i) Mr. Musk’s 2024 annual total compensation to (ii) the median of the 2024 annual total compensation of all applicable qualifying Tesla employees other than Mr. Musk, in each case calculated pursuant to the disclosure requirements of “Summary Compensation Table” above. As we continue our expansion, the median annual total compensation of our employees reflects differences in local compensation scales and practices.
Mr. Musk’s 2024 annual total compensation, as reported under “Summary Compensation Table,” was $0, and the median 2024 annual total compensation of all other qualifying employees, as determined pursuant to the methodology set forth below, was $57,243. Consequently, the applicable ratio of such amounts for 2024 was 0.00:1.
Our methodology for identifying the median of the 2024 annual total compensation for each individual other than Mr. Musk was as follows:
| · | We selected December 31, 2024, which is within the last three months of 2024, as the date upon which we would identify the “median employee” because it enabled us to make such identification in a reasonably efficient and economical manner. |
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| · | We determined that as of December 31, 2024, Tesla and all our subsidiaries had 126,507 individuals qualifying for this analysis (full-time, part-time and temporary employees other than Mr. Musk, subject to the following bullet), of which approximately 43% were based outside of the U.S. and approximately 37% were production line employees. |
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| · | We did not include in the population of qualifying individuals any employees of staffing agencies whose compensation is determined by such agencies. |
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| · | We applied the requirements and assumptions required for the table under “Summary Compensation Table” above for each of such individuals to calculate the total annual compensation, including base salary or wages, performance-based commission payments, and equity awards based on their grant date fair values. |
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| · | We converted any payment earned or paid in a foreign currency to U.S. dollars using the average of the prevailing conversion rates for the month of December 2024. |
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| · | We selected the median of all total annual compensation amounts calculated in accordance with the foregoing. |
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Employee Risks
The Compensation Committee oversees management of risks relating to Tesla’s compensation plans and programs. Tesla’s management and the Compensation Committee have assessed the risks associated with Tesla’s compensation policies and practices for all employees, including non-executive officers. These include risks relating to setting ambitious targets for our employees’ compensation or the vesting of their equity awards and our emphasis on at-risk equity-based compensation, and the potential impact of such practices on the retention or decision-making of our employees, particularly our senior management. Based on the results of this assessment, Tesla does not believe that its compensation policies and practices for all employees, including non-executive officers, create risks that are reasonably likely to have a material adverse effect on Tesla.
Compensation of Directors
2024 Director Compensation Table
The following table provides information concerning the compensation paid by us to each of our non-employee directors who served during any part of fiscal year 2024. Elon Musk, who is a named executive officer, does not receive additional compensation for his services as a director.
The awards with respect to which values are provided under the column “Option Awards” below are exclusively stock options, which have realizable value only if they vest over time and to the extent, if any, that our stock price exceeds the applicable exercise prices. The values provided below for these awards are based on applicable accounting standards, and do not necessarily reflect the actual amounts realized or realizable pursuant to the underlying stock options.
| Fees Earned or | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Paid in Cash | Option Awards | All Other | Total | |||||||||||||
| Name | ($)(1) | ($)(2)(3) | Compensation | ($) | ||||||||||||
| Robyn Denholm | — | — | — | — | ||||||||||||
| Ira Ehrenpreis | — | — | — | — | ||||||||||||
| Joe Gebbia | — | — | — | — | ||||||||||||
| James Murdoch | — | — | — | — | ||||||||||||
| Kimbal Musk | — | — | — | — | ||||||||||||
| JB Straubel | — | — | — | — | ||||||||||||
| Kathleen Wilson-Thompson | — | — | — | — |
| (1) | Reflects cash compensation for service on the Board and/or its applicable committees pursuant to Tesla’s outside director compensation policy (the “Director Compensation Policy”) and/or for service as Chair of the Board as previously approved by the Board, as applicable. The earning and payment of cash retainer payments payable to outside directors may be waived in whole or part at the election of the director. All seven of the outside directors have requested that the Company eliminate the future payment of all of their cash retainer amounts for service on the Board unless the director notified otherwise. |
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| (2) | As of December 31, 2024, the aggregate number of shares underlying option awards outstanding for each of our non-employee directors with such awards was: |
|---|
| Aggregate Number of | ||
|---|---|---|
| Shares Underlying | ||
| Name | Options Outstanding | |
| Robyn Denholm(4) | 1,020,220 | |
| Ira Ehrenpreis(4) | 1,110,000 | |
| Joe Gebbia | — | |
| James Murdoch(4) | 1,020,000 | |
| Kimbal Musk(4) | 326,750 | |
| JB Straubel | — | |
| Kathleen Wilson-Thompson(4) | 565,855 |
| (3) | Reflects stock option grants for service on the Board or as members or chairs of Board committees that were automatically granted pursuant to the Director Compensation Policy. In June 2021, the Board unanimously adopted a resolution to forego any automatic grants of annual stock option awards under the Director Compensation Policy or otherwise previously approved by the Board (the “Board Stock Option Grants”) until July 2022 unless the Board earlier acts to amend the Director Compensation Policy or otherwise amends such resolution. In May 2022, the Board agreed to further forego the Board Stock Options Grants until the Board earlier acts to amend the Director Compensation Policy or otherwise amends such resolution. Under the Stipulation and Agreement of Compromise and Settlement (the “Detroit Settlement Agreement”) in connection with a derivative action brought by a purported Tesla stockholder regarding compensation awards granted to Tesla’s directors, other than Elon Musk, between 2017 and 2020, the Board will permanently forego the Board Stock Option Grants for 2021 and 2022, and the Board will not receive any compensation for Board service for 2021 and 2022. Ms. Denholm, Mr. Ehrenpreis, Kimbal Musk, Mr. Murdoch and Ms. Wilson-Thompson will also permanently forego any compensation for Board service for 2023. See “Other Information” below for additional information regarding the Detroit Settlement Agreement. |
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| (4) | In connection with the Detroit Settlement Agreement, certain current or former directors have agreed to, among other things, return to Tesla certain unexercised options, totaling 1,957,861, that were awarded as compensation from 2017 to 2020 (the “Returned Options”). Tesla expects to implement the provisions of the Detroit Settlement Agreement in May 2025 by cancelling the Returned Options. Once the Returned Options are cancelled, the number of authorized shares under the Tesla, Inc. 2019 Equity Incentive Plan will be increased by the number of Returned Options. The Returned Options are included in this table. |
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Overview and Philosophy
The compensation program for Tesla’s non-employee directors is designed to be consistent with our compensation philosophy for our employees, with an emphasis on equity-based compensation over cash in order to align the value of their compensation with the market value of our stock, and consequently, with the long-term interests of our shareholders. Moreover, while we offer to our general employee population restricted stock units that will retain some value even if the market value of our stock decreases, the equity-based compensation to our directors has been exclusively in the form of stock options, which have zero initial value and accumulate value, if at all, only to the extent that our stock price increases following their grant, through the applicable vesting dates and until such stock options are ultimately exercised and the underlying shares are sold. The remaining portion of our directors’ compensation has consisted of cash retainer payments that are relatively modest compared to peer companies and that may be waived at the election of each director. Consequently, a large portion and in some cases, the entirety, of each of our non-employee directors’ compensation is entirely at risk, and fluctuating stock prices have at times resulted in 100% of the vested stock options then held by each of our non-employee directors being out-of-the-money.
In 2020 and 2021, the Compensation Committee reviewed the Director Compensation Policy with the aid of Compensia and in light of Tesla’s exceptional performance and commitment to at-risk director compensation in the form of annual stock option awards to ensure continued alignment of the interests of directors with those of Tesla’s shareholders. Following such review, the Compensation Committee recommended that the Board approve a resolution that all existing directors forego any automatic grants of annual stock option awards under the Director Compensation Policy or otherwise previously approved by the Board until July 2022 unless the Board earlier acts to amend the Director Compensation Policy or otherwise amends such resolution. In June 2021, the Board unanimously approved and adopted this resolution and in May 2022, the Board agreed to further forego the Board Stock Option Grants until the Board earlier acts to amend the Director Compensation Policy or otherwise amends such resolution. The Compensation Committee intends to make further recommendations with respect to the Board’s compensation program for directors, if any, who join the Board after the date of this resolution, as well as for future periods of service by existing directors, following further periodic reviews.
Other Information
If, following a change in control of Tesla, the service of a non-employee director is terminated, all stock options granted to the director shall fully vest and become immediately exercisable.
Non-employee directors may also have their travel, lodging and related expenses associated with attending Board or Board committee meetings reimbursed by Tesla.
On June 17, 2020, a purported Tesla stockholder filed a derivative action in the Delaware Court of Chancery, purportedly on behalf of Tesla, against certain of Tesla’s current and former directors regarding compensation awards granted to Tesla’s directors, other than Elon Musk, between 2017 and 2020. The suit asserts claims for breach of fiduciary duty and unjust enrichment and seeks declaratory and injunctive relief, unspecified damages and other relief. Defendants filed their answer on September 17, 2020.
On July 14, 2023, the parties filed a Stipulation and Agreement of Compromise and Settlement, which does not involve an admission of any wrongdoing by any party. Pursuant to the terms of the agreement, Tesla provided notice of the proposed settlement to stockholders of record as of July 14, 2023. The Court held a hearing regarding the settlement on October 13, 2023, after which it took the settlement and plaintiff counsels’ fee request under advisement. On January 8, 2025, the Court approved the settlement and awarded Plaintiff’s counsel fees in the amount of approximately $176 million. A final judgment was entered by the Court on January 13, 2025.
The Company disagrees with the amount of attorneys’ fees awarded by the court. On February 10, 2025, Tesla appealed the attorneys’ fee award amount to the Delaware Supreme Court. Tesla did not appeal the Delaware Court of Chancery’s approval of the underlying settlement. Also on February 10, 2025, a single shareholder appealed the approval of the settlement. This shareholder’s appeal does not seek to alter any material terms (e.g., financial contributions or the defendants’ obligations under the Detroit Settlement Agreement). The Delaware Court of Chancery had previously rejected this shareholder’s objections when approving the Detroit Settlement Agreement.
Because neither Tesla’s appeal nor the shareholder’s appeal seeks to vacate the Detroit Settlement Agreement or materially modify its terms, the Company expects to implement the provisions of the Detroit Settlement Agreement in May 2025 by cancelling the options requiring cancellation under its terms. The settlement is not expected to have an adverse impact on our results of operations, cash flows or financial position.
Pledging of Shares
The ability of our directors and executive officers to pledge Tesla stock for personal loans and investments is inherently related to their compensation due to our use of equity awards and promotion of long-termism and an ownership culture. Moreover, providing these individuals flexibility in financial planning without having to rely on the sale of shares aligns their interests with those of our shareholders.
In order to mitigate the risk of forced sales of pledged shares, the Board has a policy that limits pledging of Tesla stock by our directors and executive officers. Pursuant to this policy, directors and executive officers may pledge their stock (exclusive of options, warrants, restricted stock units or other rights to purchase stock) as collateral for loans and investments, provided that the maximum aggregate loan or investment amount collateralized by such pledged stock does not exceed, (i) with respect to our CEO, the lesser of $3.5 billion or twenty-five percent (25%) of the total value of the pledged stock, or (ii) with respect to our directors and officers other than our CEO, fifteen percent (15%) of the total value of the pledged stock.
Example: A director (other than our CEO) pledges 1,000 shares as collateral for a loan, and the current stock price is $800 per share. The director may borrow up to 15% of 1,000 x $800, or $120,000, against such shares. If the stock price later increases to $1,600 per share, the director may borrow up to an additional $120,000 against the pledged shares. If the director borrows the full allowable amount of $240,000 and the stock price then decreases to $1,200, the director must repay $60,000 to maintain compliance with the 15% limit under the pledging policy.
See “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters—Ownership of Securities” under Item 12 below for information regarding any shares pledged by our directors or executive officers as of December 31, 2024; however, such pledging does not indicate the extent to which there may be actual borrowings against such shares as of such date, which may be substantially less than the value of the shares pledged. As of December 31, 2024, based on written representations of our directors and executive officers to the Company, the aggregate loan or investment amount collateralized by our directors and executive officers’ pledged shares was less than 1% of the total value of the pledged shares.
We require our directors and executive officers to make written representations, at least annually, that he or she is in compliance with our pledging policy. If a director or executive officer wishes to take a loan collateralized by pledged stock, Tesla management works with the director or executive officer during the original loan approval, and subsequently monitors compliance with this policy by regularly reviewing and requesting updates from the applicable director or executive officer on his or her pledged stock amount and loan amount. If necessary, Tesla management will report to the Board or its committees the extent to which any officer or director has pledged shares of Company stock. We believe that this monitoring is effective and includes appropriate controls, and we have confirmed that each of our directors and executive officers who have pledged stock are and have been compliant with this policy since our last confirmation.
Compensation Committee Interlocks and Insider Participation
Robyn Denholm, Ira Ehrenpreis and Kathleen Wilson-Thompson served as members of the Compensation Committee during 2024. None of such persons is or was formerly an officer or an employee of Tesla. See “Certain Relationships and Related Person Transactions and Director Independence—Related Person Transactions” under Item 13 below for certain transactions involving Tesla in which members of the Compensation Committee may potentially be deemed to have an indirect interest.
During 2024, no interlocking relationships existed between any member of Tesla’s Board or Compensation Committee and any member of the board of directors or compensation committee of any other company.
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