Elon Musk’s bid to reinstate his record-breaking $56 billion Tesla pay package was rejected by a Delaware judge on December 2, 2024. The decision follows a January ruling that declared the compensation plan improperly awarded, with Tesla announcing plans to appeal. Chancellor Kathaleen McCormick ruled that Musk had improperly influenced the board in approving his pay, labeling the approval process “deeply flawed.”
Delaware judge rejects Elon Musk’s $56 billion pay package
The rejected plan, which includes 303 million stock options that are now valued around $101 billion, was originally voided after a lawsuit from Tesla shareholders. Judge McCormick underscored that Musk and the board did not demonstrate the package’s fairness, stating, “The board capitulated to Musk’s terms and then failed to prove that those terms were entirely fair.” Despite the package receiving approval from 84% of shares in a June shareholder vote, the judge remarked that shareholder approval does not equate to their best interests being served.
In January, McCormick initially invalidated the pay plan, leading to scrutiny over Musk’s direct influence on compensation decisions. Musk’s attorneys argued that the shareholder vote should be considered a ratification, but with this latest ruling, McCormick dismissed those claims as “unprecedented theories” contradicting established law.
Notably, Musk does not receive a cash salary or bonus from Tesla; his earnings stem from stock options, which allow him to buy shares at below-market prices. The judge acknowledged that although Musk is entitled to compensation, the approved amount fell short of being fair to shareholders. McCormick commented on the nature of the relationship between Musk and the board, stating that they were “too close” and that Musk had practically negotiated for himself.
Following the January ruling, Tesla sought to reincorporate in Texas, asserting a departure from Delaware due to its challenges in securing favorable judicial outcomes. This decision was echoed by Musk relocating his defense contractor firm, SpaceX, to Texas as well.
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Despite the legal challenges, Musk’s fortunes have notably increased in recent weeks. His overall net worth gained over $43 billion since Donald Trump’s election victory in November. Tesla’s stock surged 42% within four weeks of this event, fueling optimism around potential favorable policies for Musk’s interests due to his proximity to the incoming administration.
Musk’s wealth primarily hinges on the stock value of Tesla, which remains significant, as his holdings are now valued up to $150 billion. Equilar estimates that Musk’s 2018 compensation plan, if reinstated, could have reached a value of $101.4 billion at current stock prices.
Elon Musk’s involvement extends beyond Tesla; he has actively participated in the political arena, contributing significantly to Donald Trump’s campaign. The incoming administration announced plans to engage Musk in a newly established Department of Government Efficiency, aiming to prod significant budget reforms and deregulations.
Featured image credit: Kerem Gülen/Midjourney
