What just happened? You probably imagine that as the richest person in the world with a net worth of around $352 billion, Elon Musk has enough money. But the CEO looks set to become even richer after Tesla awarded him an interim pay package of 96 million shares of restricted stock valued at approximately $29 billion. The compensation is to "incentivize" Musk to stay as the head of Tesla during the battle against a court ruling that voided his original $50 billion package from 2018.
At the start of 2024, Delaware Court Judge Kathaleen St. J. McCormick voided Musk's 2018 $50 billion compensation package. Shareholder Richard Tornetta had filed a lawsuit at the time after the EV giant granted Musk the largest executive compensation package in history.
Tornetta accused Tesla of breaching its fiduciary duty by unjustly enriching its CEO, the board of directors acting without independence, and Musk of dictating negotiations. But Tesla's directors argued that the size of the compensation package was necessary to ensure Musk dedicated his attention to Tesla.
McCormick ruled that Musk wielded the maximum influence at Tesla that a manager can have over a company, and that the deal was unfair to shareholders.
Tesla shareholders twice voted to give Musk his compensation, but McCormick upheld her decision to block it, most recently in December. In January, Tesla said it would appeal the judge's decision to the Delaware Supreme Court.
The case is also notable for the $7.6 billion worth of stock the lawyers who fought against Musk asked for as payment. The judge said they were entitled to $345 million. Musk also moved Tesla's and SpaceX's state of incorporation from Delaware to Texas as a result of the case.
The public vote is unequivocally in favor of Texas!
– Elon Musk (@elonmusk) February 1, 2024
Tesla will move immediately to hold a shareholder vote to transfer state of incorporation to Texas. https://t.co/ParwqQvS3d
Tesla's brand and image have suffered as a result of Musk's former friendship with Donald Trump and his tenure at DOGE. Its stock is down around 19% since the start of the year, and its deliveries were down roughly 13% YoY for both quarters.
However, Tesla still has plenty of faith in its leader. It set up a special committee earlier this year to look at new ways of compensating Musk, who the board says "has not received meaningful compensation for eight years."
Should the Delaware appeal court decide to reverse McCormick's decision and hand Musk his 2018 pay package, the $29 billion interim grant would be forfeited or offset. By accepting the stock, Musk is agreeing to continue as Tesla CEO until 2027.
Shareholders will vote on the new deal at their annual meeting on November 6.
I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control. Enough to be influential, but not so much that I can't be overturned.
– Elon Musk (@elonmusk) January 15, 2024
Unless that is the case, I would prefer to build products outside of Tesla. You don't seem to understand…
Musk remains Tesla's largest shareholder with a 13% stake. But he previously issued an ultimatum to Tesla stating that unless his ownership in the company increased to 25%, he would be "uncomfortable growing Tesla to be a leader in AI & robotics."
Tesla to give Elon Musk $29 billion in stock to keep him as CEO
