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How Much Is Too Much? Elon Musk’s Compen...

Hopkins, Justin J....

Case

How Much Is Too Much? Elon Musk’s Compensation at Tesla

Hopkins, Justin J.; Adkins, Thomas

C-2505 | Published August 13, 2025 | 19 Pages Case

Collection: Darden School of Business

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In March 2018, Tesla, Inc. (Tesla), shareholders approved an employee stock-option package (ESOP) for CEO Elon Musk potentially worth $55 billion. The package was quickly challenged in court by shareholder Richard Tornetta on the basis that it was excessive and that shareholders were not fully informed about Musk’s relationships with certain members of the compensation committee or the attainability of the performance milestones. The courts ruled in favor of Tornetta in 2024; however, shareholders responded by reapproving the original compensation package, instigating a series of legal actions that sent the case to the Delaware Supreme Court. This case places students in the role of a buy-side equity analyst in 2025, tasked with educating the partners of their firm on how Musk’s ESOP was structured and accounted for in Tesla’s financial statements under US Generally Accepted Accounting Principles (GAAP). Optional topics include discussing why ESOPs are structured in this manner, why the original plan was struck down by the courts, and whether the board of directors at Tesla could independently represent shareholders. Students explore the technical aspects of employee stock-ownership plans as well as analyze incentive structures to gain insight into a company’s current and future operations.

Learn how to account for ESOPs under US GAAP; discuss the role of a compensation committee and the dynamics between company boards and executives; understand how ESOPs are structured to incentivize employees; evaluate the alignment of executive and shareholder incentives; and compare and contrast performance metrics and their relationship to value creation.