Tesla CEO Elon Musk has announced plans to provide stock-based remuneration to high-performing employees through stock option grants and spot option grants, acknowledging their extraordinary achievements. This decision was communicated to Tesla employees on Monday via an internal memo, which two individuals, one in China and the other in the United States, reviewed. The announcement follows the recent approval of Musk’s $56 billion pay package, which also included stock options, by Tesla’s shareholders. Furthermore, it comes two months after Tesla announced significant job cuts, reducing more than 10% of its global workforce. This reduction was a strategic response to a slowdown in electric vehicle (EV) demand and increasing price competition from Chinese manufacturers.
According to the memo, Tesla will conduct a comprehensive review in the coming weeks to grant stock options for exceptional performance. Musk emphasized the company’s commitment to recognizing extraordinary contributions through spot option awards, which will be continuously awarded to those who achieve remarkable results. The memo concluded with Musk thanking employees for their efforts in helping Tesla succeed.
This move represents a significant shift in Tesla’s compensation strategy, especially considering that the company did not award merit-based equity last year. The previous year saw Tesla implementing substantial price cuts to stimulate demand and counteract competitive pressures, which negatively impacted the company’s margins. Consequently, Tesla's stock has experienced a 25% decline since the start of 2024, reflecting concerns over a pronounced sales slowdown.
Tesla's decision to reintroduce stock-based rewards is likely aimed at boosting employee morale and retaining top talent amidst challenging market conditions. It underscores Musk’s strategy of aligning employee incentives with company performance, hoping to drive further innovation and commitment within the workforce. Despite the recent financial setbacks and market pressures, this initiative could help reinforce a culture of excellence and sustained high performance at Tesla. However, Tesla did not immediately respond to Reuters' request for comment on the new compensation plan, leaving some details of the implementation still unclear.
