Delaware court rules Musk gets $55 billion compensation deal
Elon Musk, already the world’s richest man, achieved another significant victory when the Delaware Supreme Court overturned a decision that had denied him a $55 billion pay package that Tesla awarded in 2018 as an incentive for its CEO to guide the automaker to new heights. In addition to augmenting Musk’s current fortune of $679 billion, the reinstatement of the 2018 pay package affirms his long-standing conviction that the Delaware legal system exceeded its authority in January 2024 when Chancellor Kathaleen St Jude McCormick annulled the compensation in a case initiated by a dissatisfied Tesla shareholder. Tesla has not yet provided a response to a request for comment made late Friday.
Musk was so incensed by McCormick’s ruling that it led him to reject Delaware and reincorporate Tesla in Texas. The decision prompted Tesla’s board to seek methods to ensure the satisfaction of its CEO, including a successful initiative to convince the company’s shareholders to reaffirm the pay package, which was valued at $44.9 billion during the second vote 18 months prior. With Musk still expressing dissatisfaction, Tesla has raised the stakes once more this year by designing a new compensation package that could reward him with $1 trillion if he successfully guides the automaker over the next decade, increasing the company’s market value from its current $1.6 trillion to $8.5 trillion. Last month, shareholders approved that pay package, much to Musk’s delight.
While it may seem like a challenging endeavor, it also appeared to be a long shot for Musk to achieve all the targets necessary to qualify for the payout promised in the 2018 package. During that period, Tesla was facing challenges in scaling up its electric vehicle production and was depleting its financial resources. When the 2018 pay package was established, Tesla’s market value was fluctuating between $50 billion and $75 billion. However, the company’s manufacturing issues subsided, allowing it to begin satisfying the high demand for its vehicles. This, in turn, boosted its sales and stock price to a level that made Musk eligible for the substantial payout that had been promised to him.
However, drawing from evidence that encompassed Musk’s testimony during a 2022 trial, McCormick determined that the pay package had been designed by a board that was overly familiar and indebted to the assertive Musk. The Delaware Supreme Court, in its 49-page ruling, identified several errors in McCormick’s 2024 decision and stated that the 2018 pay package must be reinstated. Tesla was awarded $1 in nominal damages.
