Dover: Elon Musk, already the world’s richest man, scored another huge windfall Friday when the Delaware Supreme Court reversed a decision that deprived him of a USD55 billion pay package that Tesla doled out in 2018 as an incentive for its CEO to steer the automaker to new heights.
Besides padding Musk’s current fortune of USD 679 billion, the restoration of the 2018 pay package vindicates his long-held belief that the Delaware legal system had overstepped its bounds in January 2024 when Chancellor Kathaleen St Jude McCormick rescinded the compensation in a case brought by a disgruntled Tesla shareholder.
Tesla didn’t immediately respond to a request for comment late Friday.
McCormick’s ruling so incensed Musk that it spurred him to spurn Delaware and reincorporate Tesla in Texas. That decision also caused Tesla’s board to scramble for ways to keep its CEO happy, including a successful effort to persuade the company’s shareholders to reaffirm the pay package, which was valued at USD 44.9 billion at the time of the second vote 18 months ago.
With Musk still signaling discontent, Tesla upped the ante again this year by crafting another pay package that could pay him USD 1 trillion if he can lead the automaker down a road during the next decade that lifts the company’s market value from its current USD 1.6 trillion to USD 8.5 trillion. Shareholders approved that pay package last month, to Musk’s delight.
That may sound like a difficult task, but it also appeared like a long shot for Musk to hit all the targets to qualify for the payout that was dangled in the 2018 package. At that time, Tesla was still struggling to expand its production of electric vehicles and burning through cash.
At the time the 2018 pay package was drawn up, Tesla’s market value was hovering in the $50 billion to $75 billion range. But then the company’s manufacturing problems eased, enabling it to start meeting hot demand for its vehicles, which in turn pumped up its sales and stock price to a level that qualified Musk for the big payout that had been promised him.
But based on evidence that included Musk’s testimony during a 2022 trial, McCormick ruled the pay package had been crafted by a board that was too cozy and beholden to the hard-charging Musk.
In its 49-page ruling, the Delaware Supreme Court cited a variety of errors in McCormick’s 2024 decision and declared the 2018 pay package should be restored.
