Elon Musk’s $56 billion pay package from Tesla is back on the table, thanks to a recent decision by the Delaware Supreme Court. This comes two years after a lower court called the compensation deal “unfathomable.”
Now, experts say this package could be worth up to $139 billion today, mostly due to Tesla’s soaring stock value. Just two months ago, Tesla shareholders approved a plan that could add as much as $1 trillion to Musk’s wealth over the next decade. Currently, Musk’s fortune sits at around $600 billion.
The Delaware Supreme Court said cancelling the pay package would be unfair, leaving Musk “uncompensated for his time and efforts” over six years. The court supported arguments made by Tesla board members who believed Musk deserved the pay for driving the company forward.
At Tesla’s annual meeting in Austin this November, shareholders took a precautionary step to ensure Musk would still receive the $56 billion regardless of the court’s ruling.
Both the reinstated and other compensation plans require Musk to meet high goals related to product development and increasing Tesla’s worth. This includes a target of hitting $8.5 trillion in market value.
The saga began years ago when a Tesla stockholder, owning just nine shares, filed a lawsuit claiming the pay package was excessive. The high-profile case drew attention, especially when it led Musk to relocate Tesla operations from Delaware to Texas. Musk publicly criticized Delaware’s judicial system, stating, “She has done more to damage Delaware than any judge in modern history,” referring to Chancellor Kathaleen McCormick, who initially struck down the pay package.
In 2024, shareholders voted on the pay plan again, but McCormick ruled it was flawed, citing undue influence from Musk in its development.
Despite Musk’s strong feelings about Delaware, experts have noted that only a handful of companies have actually moved their headquarters away from the state. Large firms like Dropbox and Coinbase have made the switch, but many others, including Meta, have only considered it. The majority of Fortune 500 companies still call Delaware home.
While the court acknowledged a breach of duty in how Musk’s pay was presented to shareholders, they ruled that taking away the entire package was not justified. They awarded a nominal $1 in damages to the plaintiff, signaling a complex balance between corporate governance and compensation ethics.
In today’s landscape, where CEO pay is frequently scrutinized, this case exemplifies the challenges of aligning executive compensation with shareholder interests, a crucial topic as industries adapt to changing economic realities.
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