Appeals Court reinstates Elon Musk’s $56bn Tesla compensation

A Delaware appeals court cleared the way on Friday for Elon Musk to receive a long-contested $56 billion pay package from Tesla, reversing an earlier judgment in the protracted case.

The decision by the Delaware Supreme Court rejected two prior judgments issued by Chancellor Kathaleen McCormick of the state’s Court of Chancery, setting the stage for the world’s richest person to receive another significant financial windfall.

In two rulings made in early 2024, McCormick invalidated the 2018 compensation package, which was once considered historically large but has since been overshadowed by Musk’s more recent Tesla pay package.

The five-judge panel determined that McCormick improperly ordered a rescission, which would have resulted in the complete cancellation of Musk’s package.

The ruling stated, “It is undisputed that Musk fully performed under the 2018 grant, and Tesla and its stockholders were rewarded for his work,” thus reversing the earlier rescission.

Although the 2018 package was approved by a majority of Tesla shareholders, it was challenged in court by shareholder Richard Tornetta, who argued that the award was excessive.

In a statement released online on Friday, attorneys representing Tesla shareholders mentioned that they were considering their next steps.

In January 2024, the court struck down the award following a five-day trial, labeling the approval process as “deeply flawed.”

The court concluded that the board had proven vulnerable to manipulation by Musk, identified as the “paradigmatic ‘Superstar CEO’” by McCormick, who upheld her determination in December 2024 after an appeal.

Despite the legal challenges, Tesla’s board has consistently supported Musk throughout the saga, approving an interim compensation award in August worth approximately $29 billion, and later unveiling a new pay package potentially worth up to $1 trillion.

On November 6, Tesla shareholders easily approved this latest package, which is linked to various performance and valuation targets.

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