This article first appeared on GuruFocus.
Equilar’s latest analysis, prepared for Reuters, has pointed to potentially elevated governance concerns at Tesla (NASDAQ:TSLA) after finding that the company’s board of directors has generated more than $3 billion in lifetime compensation, largely tied to stock-option awards whose value expanded alongside the share price. The review highlighted that five current nonexecutive directors account for that figure, with Elon Musk’s brother Kimbal Musk earning nearly $1 billion since 2004, Ira Ehrenpreis about $869 million since 2007, and board chair Robyn Denholm roughly $650 million since 2014. Between 2018 and 2020, the average director received around $12 million in cash and stock compensation, a level Equilar calculated to be about eight times higher than Alphabet’s over the same period, even though Tesla has not granted new director stock awards since 2020 and suspended board pay starting in 2021 as part of a shareholder lawsuit settlement.
Equilar’s broader comparison across the so-called Magnificent Seven suggested that while directors at Nvidia (NASDAQ:NVDA), Alphabet (NASDAQ:GOOG) and Meta (NASDAQ:META) have also benefited from rising equity values, Tesla appears unusual in how much of that wealth stems from the size of the original option grants themselves. Tesla directors averaged roughly $1.7 million a year from 2018 through 2024, including years with suspended compensation, which was still about two-and-a-half times the level at Meta, the next highest-paid board over that stretch. Corporate-governance specialists reviewing the data told Reuters that Tesla’s preference for compensating directors with stock options rather than shares is rare among large U.S. companies and could amplify upside without equivalent downside exposure, potentially affecting board independence. Tesla responded that options only deliver value if the share price rises and said its directors commit substantial time, citing 58 board or committee meetings in 2024, a pace it described as well above industry norms.
These governance questions come as investors continue to assess the implications of Elon Musk’s compensation structure, after a Delaware court last year invalidated the board-approved 2018 CEO pay package, valued at $132 billion at current prices, citing concerns around director independence and personal ties. Tesla has appealed that decision and said it would pursue a replacement package worth at least $42 billion if unsuccessful, while also proposing a new plan that could grant Musk stock potentially worth close to $1 trillion over the next decade before purchase costs. Governance experts told Reuters that the scale of director compensation, combined with the board’s central role in shaping Musk’s pay, could remain a key consideration for investors weighing oversight quality and long-term alignment with shareholder interests.
