Elon Musk is trying yet again to get what would have been his $56 billion Tesla pay package reinstated with an appeal to the Delaware Supreme Court.
In court documents filed yesterday, Musk's legal team argued Delaware Court of Chancery Judge Kathaleen McCormick made multiple legal errors when she voided his pay package - first in January 2024, and again later that year after Tesla shareholders voted to reinstate it.
McCormick was wrong to void Musk's record CEO compensation by ruling the process was unfair to investors, Tesla's lawyers told Delaware's top court, claiming these investors had benefited from his "motivated and exceptional leadership."
"That counterintuitive result defies settled principles of Delaware law, sound corporate governance, and common sense," they insisted.
For those unfamiliar with the ongoing saga of Musk's Tesla pay package, the record-setting CEO compensation deal was approved by Tesla's board in 2018 and would have given Musk a string of performance-based awards and options valued at the aforementioned $56 billion, contingent upon Tesla meeting a series of market capitalization and operational milestones.
We note the value of the tycoon's pay package, largely tied to Tesla shares, has fluctuated: Initially worth $56 billion, it dropped to $48 billion at the time of shareholder re-ratification, and has likely changed again because the stock price keeps moving; it's down 35 percent year to date and up 40 percent over the past 12 months.
For those who have been in a coma for the past three months, the world's richest man has gone on a cost-and-jobs-slashing drive around the US federal government as the éminence grease of Donald Trump, the part-Tesla salesman and part-President who has been rattling the stock market with talk of a recession and on-off-on-off import tariffs against allies among other moves. As a result, the personal wealth of Musk – someone closely linked to Trump and one of the top Republican's biggest political donors – has reportedly dived more than $120 billion so far this year as it's largely made up of Tesla stock lately dwindling in value.
Elon Musk giving that salute at Trump's 2025 inauguration
Heil yea, I think I'm worth it ... Elon Musk waves goodbye to his Tesla wealth at President Trump's inauguration
Whatever the pay package's value right now, those aforementioned growth milestones hadn't been met when Tesla shareholder Richard Tornetta filed a derivative lawsuit in 2018 on behalf of Tesla to halt the compensation deal. Tornetta's team argued that Musk, as a significant shareholder with personal ties to multiple board members, had undue influence over the decision to award him that package, potentially compromising its fairness and alignment with Tesla's best interests.
Judge McCormick agreed, describing the compensation plan as a "conflicted-controller transaction" because Musk had significant influence over the board members who approved it, making the deal unfair to other investors.
Tesla shareholders later voted to reinstate the package, and Judge McCormick reaffirmed her decision, finding that the proxy statement urging shareholders to approve the deal contained multiple false or misleading claims. Those misrepresentations, she ruled, invalidated the vote.
"The proxy statement's multiple, material misstatements concerning the effect of the stockholder vote, ironically, independently bar that vote from having any ratifying effect," Judge McCormick explained in her second decision to void the pay package.
Musk's lawyers begged to differ in their filing to the Supreme Court of Delaware, instead arguing it was Judge McCormick who was wrong.
"The Court of Chancery … applied the onerous entire fairness standard because it concluded that Musk controlled the board during the transaction," Musk's team argued in yesterday's filing, calling the application of that standard a legal error. "Musk owned less than a quarter of Tesla's stock, had no power to dictate terms to the board, and did nothing to dominate or coerce the directors during the transaction."
Musk's attorneys claim Judge McCormick misapplied the legal standard by suggesting Musk may have accepted a lower compensation package, if offered, despite a "lack of record evidence proving he would have agreed to less."
Team Elon further argued that rescinding the payment plan was also a legal error because "neither Musk nor Tesla could be returned to their positions in 2018 – before Musk grew the company by nearly 1400 percent on the expectation that he would be compensated under the plan," and also argued that the shareholder vote to re-approve the plan should have been sufficient to override the Chancery Court's decision.
Musk and his legal team have already appealed the Chancery Court decision to the Delaware Supreme Court, according to our prior reporting. We've reached out to Tesla and Musk's lawyers to learn whether yesterday's filing is separate or related to the January appeal and haven't yet heard back.
Whether Tesla shareholders would ratify Musk's compensation plan today is uncertain. Following President Trump's reelection last last year, Tesla's share prices surged, reaching an all-time high as Musk publicly backed the Republican's return and it was assumed this would lead to favorable conditions for the automaker. However, since then, as we pointed out above, the EV manufacturer's value has sunk to a point that it's mostly erased all those post-election gains. Currently, Tesla has been the worst performing stock in the S&P 500 this year.
Some Tesla shareholders and customers have reportedly expressed dissatisfaction with Musk's political activities and his Trump-blessed DOGE unit that's cutting thousands of federal jobs and dismantling programs and organizations. Whether shareholder concerns will have any impact on Musk's compensation now depends on the Delaware Supreme Court. ®