Elon Musk managed to reactivate his 2018 compensation package as CEO of Tesla (), after the Delaware Supreme Court overturned a judge’s ruling that the billionaire had unduly influenced the board members who created the payment plan.
This Friday (19), a court concluded that the richest man in the world is entitled to a share-based compensation plan, which is currently worth around US$140 billion. When Tesla directors approved this payment, it was the largest ever given to an executive in the United States. It has since been surpassed by another plan that could be worth $1 trillion to Musk if he meets future goals.
Musk’s 2018 compensation plan was on hold after an investor managed to block payment in Delaware, where Tesla was registered at the time. Tesla shareholders voted twice, and overwhelmingly, in favor of the plan, which gained a lot in value as the stock rose from around $20 to nearly $500 in seven years. The investor who contested the payment only had nine shares, according to court documents.
In a unanimous decision, the Delaware court said that canceling all of the CEO’s pay “leaves Musk unpaid for his work and dedication for six years.”
The decision overturned the verdict of the Chief Judge of the Court of Chancery, Kathaleen St. J. McCormick, who in January 2024 had considered that Tesla’s directors had too many conflicts of interest with Musk — who is the company’s largest shareholder — to correctly draw up the compensation plan. The decision drew criticism from business groups and Musk himself, who accused the Delaware judges of being anti-business and unfairly putting the spotlight on controlling shareholders.
Since then, Musk has begun a campaign to convince other companies to move their headquarters out of Delaware, which is where more than 60% of Fortune 500 companies are registered. Musk has moved the headquarters of Tesla, SpaceX and other companies to Texas and Nevada.
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That led to a change in Delaware law, with the support of Democratic governor Matt Meyer, that made it harder to sue large companies like Musk’s in an attempt to prevent more companies from leaving the state. Critics say the change made the rules for analyzing internal agreements too easy.
Neither Tesla nor lawyers for the shareholder who contested the payment commented on the case.
Musk, who co-founded Tesla, complained that the long legal dispute meant he was not paid for six years of work, during which he transformed the electric car maker into one of the most valuable and well-known companies in the world. According to the Bloomberg Billionaires IndexMusk has an estimated net worth of around US$643 billion.
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After Tesla moved its headquarters to Texas, directors in August created an interim compensation package valued at $30 billion in stock to compensate Musk if the Delaware Supreme Court did not revive the original plan.
To provide even more incentive, shareholders on Nov. 6 approved a stock-based plan that could make Musk the first trillionaire in history and increase his stake in Tesla to 25% or more over the next decade. To receive it, he will have to meet several goals, such as selling a million robots with artificial intelligence and putting a million autonomous robo-taxis on the streets.
At the same November meeting, shareholders approved a separate plan to replenish a special stock fund that would allow the board to give Musk more shares if Tesla loses its appeal in Delaware to revive the 2018 plan.
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