Elon Musk's $55 Billion Pay Package Restored by Delaware Supreme Court: What It Means for Tesla's Future
Major Legal Victory for Musk
Dover: Elon Musk, the wealthiest individual globally, celebrated a significant legal triumph on Friday when the Delaware Supreme Court overturned a previous ruling that had stripped him of a $55 billion compensation package awarded by Tesla in 2018. This package was designed to incentivize Musk to elevate the automaker's performance.
The reinstatement of this pay package not only boosts Musk's current wealth, estimated at $679 billion, but also validates his long-standing assertion that the Delaware judiciary had overreached in January 2024 when Chancellor Kathaleen St Jude McCormick annulled the compensation following a lawsuit from a dissatisfied Tesla shareholder.
Tesla did not provide an immediate comment regarding the ruling on Friday.
Musk's frustration with McCormick's decision led him to relocate Tesla's incorporation from Delaware to Texas. This move prompted Tesla's board to seek ways to appease their CEO, including successfully convincing shareholders to reaffirm the pay package, which was valued at $44.9 billion during a subsequent vote 18 months ago.
In response to Musk's ongoing dissatisfaction, Tesla introduced a new pay structure this year that could potentially reward him with $1 trillion if he successfully increases the company's market value from $1.6 trillion to $8.5 trillion over the next decade. Shareholders approved this ambitious package last month, much to Musk's satisfaction.
While this goal may seem daunting, achieving the targets set in the 2018 package also appeared challenging at the time, as Tesla was grappling with production issues and financial losses.
When the 2018 compensation plan was established, Tesla's market valuation was between $50 billion and $75 billion. However, as the company resolved its manufacturing challenges, it began to meet the growing demand for its electric vehicles, leading to increased sales and a surge in stock prices that ultimately qualified Musk for the promised payout.
Despite this, McCormick ruled that the pay package was created by a board that was overly accommodating to Musk, as evidenced by his testimony during a 2022 trial.
In its 49-page decision, the Delaware Supreme Court identified several mistakes in McCormick's 2024 ruling and concluded that the 2018 pay package should be reinstated.