Elon Musk filed an appeal to recover his $56 billion Tesla pay package because he believes the lower court made legal mistakes when it revoked the compensation, as reported by Reuters. The 2018 compensation package that Tesla tied to performance and valuation milestones received rejection from Delaware’s Court of Chancery in January 2024. Judge Kathaleen McCormick determined the package was detrimental to shareholders due to board member loyalty toward Musk and insufficient voting information disclosure.
The board of Tesla, alongside Musk, claims that the court decision fails to respect fundamental legal standards. The court denied the June 2024 shareholder approval as a valid reason to reinstate the pay package, although shareholders had already approved it in 2018. According to Musk’s appeal brief, the court’s decision appears illogical because it violates Delaware corporate law along with its governance framework and basic logic.
The disputed compensation plan gave Musk the right to buy 303 million Tesla shares at $23 per share when the company achieved its demanding growth objectives. The stock value of Tesla ended Tuesday at $230.58 but experienced significant market declines over recent weeks. Tesla may need to develop a new compensation plan of similar value to the original one, which could result in a $25 billion financial impact.
Musk has indicated he would start new projects beyond Tesla unless he gains more ownership in the company. Musk devotes his time to supporting President Donald Trump’s DOGE government efficiency initiative while facing protests at Tesla dealerships. Delaware encounters mounting criticism because Meta and TripAdvisor, among other companies, consider relocating operations out of the state. The “DExit” movement has pushed lawmakers to evaluate corporate laws for better protection of controlling shareholders.
Beyond Tesla, the lawsuit filed by Tesla investor Richard Tornetta presents potential major effects on executive compensation structures and corporate governance practices.
