Do you remember Elon Musk’s massive 2018 pay package, which was valued at $56 billion back then? On Friday, the Delaware Supreme Court approved it, overturning a lower court’s earlier decision that called it excessive two years ago.
Since Tesla’s stock price has risen, the package is now worth about $139 billion. This new decision reverses the earlier ruling that upset Musk and concerned investors and led to questions about Delaware’s business environment. It also means Musk stays in charge at Tesla, even after shareholders recently supported another possible pay plan that could reach $878 billion if long-term goals are achieved.
The Delaware Supreme Court said that canceling the original pay in 2024 was a mistake. In their 49-page opinion, they explained that this would have meant Musk would not be paid for six years of work.
If Musk uses all the options from the 2018 deal, his ownership in Tesla could increase from about 12.4% to 18.1%. Tesla will issue more shares for his new pay, but he still needs to meet specific goals to get them.
Gene Munster from Deepwater Asset Management, a firm that owns Tesla stock, said this is good for Musk because it lets him gain control more quickly.
Tesla’s stock rose slightly after hours, Musk tweeted that he was happy with the decision.
The Biggest Paycheck Ever.
The 2018 plan was the largest ever given to a CEO, until shareholders approved an even bigger one in November. It allowed Musk to buy about 304 million Tesla shares at a discount if the company met difficult goals. Tesla reached those goals.
However, Musk never got to use those options because someone filed a lawsuit right after shareholders approved the plan. That person, Richard Tornetta, owned only nine shares. He claimed Tesla’s directors had problems and did not share all the necessary information. As a result, the plan was canceled in 2024.
If Tesla had lost the appeal, it would have needed to find $26 billion over two years to cover a replacement pay package at today’s stock prices. The situation affected more than just Tesla. Musk said Delaware judges were not supportive of tech founders and encouraged companies to leave the state. Major companies like Dropbox, Roblox, Trade Desk, and Coinbase moved their legal headquarters to Nevada or Texas.
Even though some companies have left, Delaware is still the main location for U.S. public companies. Some believe this ruling shows more attention to what shareholders want. They may have been concerned about going against investors’ wishes and think courts should not interfere with shareholder decisions.
Could the New Tesla Pay Plan Mean Fewer Legal Problems?
Shareholders approved Musk’s new pay plan in November. Since then, Tesla has taken steps to prevent future lawsuits. Now that the company is in Texas, any shareholder who wants to bring a case must own at least 3% of the stock, which is about $30 billion. Only Musk owns that much.
Tesla’s board previously said that Musk, who is the world’s richest person and also leads SpaceX and xAI, might leave Tesla if he did not get the pay and voting power he wanted.
Getting his 2018 pay is a major win for Musk and keeps him in charge as Tesla grows and faces new competition. With both pay plans in place, Tesla gives Musk a reason to stay and updates some legal rules. For investors and others watching, this decision ends a rocky period and could bring more clarity for Tesla in the future.
