Musk's 2018 Tesla Pay Plan Reinstated After 7-Year Battle
Delaware Supreme Court Says World’s Richest Person Entitled to Stock-Based Compensation Plan Now Valued at About $140 Billion
Key Takeaways:
- The Delaware Supreme Court reinstated Elon Musk’s 2018 Tesla pay package, reversing a lower-court ruling that found he improperly influenced directors.
- The stock-based plan, now valued near $140 billion, was twice approved by shareholders and had been blocked after an investor lawsuit.
- The ruling follows Musk’s criticism of Delaware courts, Tesla’s move to reincorporate in Texas and broader legal changes aimed at curbing similar shareholder suits.
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Elon Musk won reinstatement of his 2018 pay package as chief executive of Tesla Inc., after the Delaware Supreme Court reversed the finding of a judge who said the billionaire had improperly influenced board members who came up with the compensation plan.
The high court on Dec. 19 concluded that the world’s richest person is entitled to a stock-based compensation plan now valued at about $140 billion. When Tesla directors first authorized the payout, it was the biggest ever for a U.S. executive. It’s since been eclipsed by a separate plan that could be worth $1 trillion for the Tesla CEO if he hits future performance targets.
Musk’s 2018 compensation plan had been on hold after an investor successfully sued to block it in Delaware, where the electric carmaker was incorporated at the time. Tesla investors twice overwhelmingly voted to back the plan, which surged in value as the stock soared close to $500 a share from around $20 seven years ago. The investor who challenged the payout held just nine shares, according to court filings.
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In a unanimous ruling, Delaware’s highest court said canceling the CEO’s entire payout “leaves Musk uncompensated for his time and efforts over a period of six years.”
It overturned findings by Chancery Court Chief Judge Kathaleen St. J. McCormick. She ruled in January 2024 that Tesla directors had too many conflicts with the billionaire — who owns the largest stake in the company — to properly devise his pay plan. Her decision drew the ire of corporate interests and the iconoclastic Musk, who accused Delaware’s judges of taking an antibusiness stance and unfairly putting the spotlight on controlling shareholders.
Musk has since launched a campaign to persuade other companies to yank their incorporations out of Delaware, the corporate home to more than 60% of Fortune 500 firms. Musk moved the incorporation of Tesla, Space X and his other companies to Texas and Nevada.
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That prompted a change in Delaware law, with the support of Gov. Matt Meyer, a Democrat, that made it harder to successfully sue corporate titans like Musk in hopes of stemming the tide of companies pulling their incorporations out of the state. Critics said it wrongfully eased legal standards for reviews of insider deals.
Neither Tesla nor lawyers from the shareholder who challenged Musk’s pay package responded to a request for comment.
Musk, who co-founded Tesla, has complained that the long legal fight meant he hadn’t been paid for six years of work, during which he turned the electric carmaker into one of the world’s most valuable and best-known companies. Musk has a net worth of around $643 billion, according to the Bloomberg Billionaires Index.
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After Tesla moved its incorporation to Texas, directors in August formulated an interim pay package valued at $30 billion in stock to compensate for Musk, unless the Delaware Supreme Court reinstated his original pay plan.
To create even more incentives for Musk, shareholders approved a stock-based plan Nov. 6 that could make him the first-ever trillionaire and expand his stake in Tesla to 25% or more over the next decade. To cash in, he’ll have to reach a host of at Tesla, including selling a million AI robots and getting a million self-driving robotaxis on the road.
At the same November meeting, shareholders approved a separate plan to replenish a special share pool that would allow the board to award Musk more shares if Tesla lost its appeal in Delaware to revive the 2018 compensation plan.
Jef Feeley, Sabrina Willmer and Jennifer Kay contributed to this report
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