Tesla Skips Merit-Based Stock Awards, Signaling Potential Shift in Compensation Strategy

Tesla has reportedly decided to forgo merit-based equity awards for salaried employees this year, signaling a potential shift in the company’s compensation philosophy.

Traditionally, high performers at Tesla have been rewarded with merit-based stock grants during annual reviews. However, according to a report from Bloomberg, even top-performing employees were excluded from receiving these grants this year. Though Tesla did not provide a specific reason for the change, the publication confirmed it with four employees across different departments, suggesting that the shift is widespread within the company.

While the merit-based equity awards were skipped, workers received cost-of-living increases and adjustments to their base salaries.

Interestingly, Tesla did offer stock “refreshers” to some employees who reached the end of their four-year vesting cycle, aiming to maintain competitive total compensation. This move adds an element of complexity to the situation, leaving employees uncertain about the consistency of Tesla’s compensation practices.

With 140,000 employees globally, Tesla’s decision to skip merit-based stock awards raises questions about whether this is a one-time deviation or part of a broader shift in the company’s approach to equity grants. The company has made changes to its compensation structure in the past, but the current move seems to depart from the conventional practice of motivating employees through equity incentives.

CEO Elon Musk, a strong advocate for employee stock ownership, has historically emphasized the significance of stock grants in retaining talent and fending off unionization efforts.

Musk’s concerns about the global economy, expressed throughout 2023, may be influencing these compensation decisions. The CEO has criticized the US Federal Reserve for high interest rates and warned about challenges in commercial real estate and rising credit card debt during Tesla’s third-quarter earnings call.

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