Elon Musk launches appeal to restore $56B Tesla payday
Elon Musk Fights to Restore $56 Billion Tesla Payday
Elon Musk began his appeal to reinstate his $56 billion compensation from Tesla, arguing that a lower court judge made legal errors in rescinding the record payday. The 2018 pay package led to significant growth for the electric vehicle company but was deemed unfair to shareholders by the Court of Chancery, despite their approval of the plan twice.
“That counterintuitive result defies settled principles of Delaware law, sound corporate governance, and common sense,” said Musk in the opening appeal brief.
In January 2024, Chancellor Kathaleen McCormick rescinded the stock options pay package, citing it as “unfathomable.” She believed it was unfair to Tesla shareholders due to inadequate information disclosure before their votes.
Tesla’s attempt to get shareholder approval for the pay package a second time was rejected by the judge. The package awarded Musk options to buy around 303 million Tesla shares at $23 each if the company met certain goals.
Tesla has expressed concerns about the financial impact of creating a new pay package of similar value, making the appeal crucial to maintaining Musk’s compensation and focus on the company.
Musk’s involvement in government efficiency efforts and potential product development outside of Tesla adds complexity to the situation. The appeal argues against the application of the entire fairness standard and addresses concerns about conflicts of interest among directors.
Musk has criticized the pay decision and advocated for companies to follow Tesla and SpaceX in reincorporating out of Delaware. This movement, known as “DExit,” has prompted legislative considerations to amend corporate laws in the state.
