Tesla announced an "interim" compensation award worth about $29 billion (P1.66 billion) for Elon Musk on Monday, asserting the need to retain the controversial CEO at a moment of fierce competition for top talent.

The electric vehicle maker said in a statement it will award a distribution of 96 million Tesla shares to Musk as it "intends to compensate its CEO for his future services commensurate with his contributions to our company and shareholders."

The award comes as Tesla challenges a Delaware court ruling that struck down a 2018 package of about $55.8 billion. With that appeal dragging out, Monday's announcement marks an interim step while the company develops a "longer-term CEO compensation strategy," Tesla said in a letter to shareholders.

"We have recommended this award as a first step, 'good faith' payment," said the letter. "Retaining Elon is more important than ever before."

Tesla 'rough' patch

The move comes amid a fierce battle for top engineering talent as companies like Google and Meta compete for leadership on artificial intelligence.

The Tesla letter, signed by Tesla board members Robyn Denholm and Kathleen Wilson-Thompson, described Musk as a "magnet for hiring and retaining talent at Tesla," noting that Tesla is transitioning from its electric vehicle focus "to grow towards becoming a leader in AI, robotics and related services."

Musk is viewed within the business world as a unique talent after his success with building Tesla and SpaceX into major global companies. 

But his stewardship at Tesla has come under scrutiny in the last year as car sales and profits have tumbled. 

This trend has been partly due to Musk's support for far-right political causes, but also is related to a sluggish rollout of new auto models after the polarizing Cybertruck sold poorly. 

In a July 23 Tesla earnings call, Musk warned of more potentially "rough" quarters ahead before the company's robotics and AI ventures pay off.

On the call, Musk reiterated his concern about the current framework in which he holds about 13 percent of Tesla shares prior to Monday's award.

"As I've mentioned before, I think my control over Tesla should be enough to ensure that it goes in a good direction, but not so much control that I can't be thrown out if I go crazy," Musk said.

Tesla's statement did not explicitly mention Musk's foray into politics, which has sparked consumer boycotts and vandalism. But the letter by Denholm and Wilson-Thompson alluded to concerns that Musk's attention had drifted from the company, calling the interim package a step towards "keeping Elon's energies focused on Tesla."

The massive pay package comes eight months after the judge in a Delaware court rejected Musk's even larger compensation at Tesla, denying an attempt to restore the pay deal through a shareholder vote.

Musk would be required to forfeit the new compensation package should the appeals court rule in his favor and grant him the full 2018 compensation, which at the time was valued at $55.8 billion.

The new payout is sure to fuel concerns about the compensation for Musk, already the world's richest man, and whether the Tesla board is placing a sufficient check on the company's chief executive.

Tesla shares rose 2.4 percent Monday in early trading.