by Delaware Supreme Court Reinstates Musk’s Billion-Dollar Compensation
The Supreme Court of the State of Delaware has issued a ruling that fundamentally changes the situation surrounding Elon Musk’s 2018 compensation package. The judges overturned a previous decision that had annulled the colossal $56 billion compensation deal. This step legally secures Musk’s right to the options, significantly increasing his wealth.
The original deal, which at the time of its announcement was considered the largest in corporate history, granted Musk options to purchase approximately 304 million Tesla shares at a discount. The fulfillment of the deal was conditional and depended on the company achieving a series of financial and operational targets, which subsequently occurred.
The True Value of the Deal Reaches $140 Billion
Due to the rapid increase in Tesla’s stock price since the deal was signed, its current market value is significantly higher than the initial $56 billion. According to estimates, this compensation is worth about $140 billion today. However, while recognizing the reinstatement of the package, the court simultaneously imposed a symbolic penalty on Musk.
We reverse the remedy of rescission adopted by the Court of Chancery and award $1 in nominal damages. Given the plaintiff’s inability to prove entitlement to any other form of recovery, the plaintiff is entitled to $1 in nominal damages
The court ordered Musk to pay $1 and cover legal costs, citing certain unfairness in the deal. This decision comes against the backdrop of a rapid increase in Elon Musk’s personal wealth, which this week crossed the $600 billion mark for the first time in history and is now approaching $749 billion.
Conflict Over the Independence of the Board of Directors
The previous decision to annul the compensation in 2024 was made by Judge Kathaleen McCormick. She found that Tesla’s board of directors was compromised by conflicts of interest and that investors did not receive critically important information. The judge also determined that the board acted under Musk’s influence rather than exercising independent oversight.
Musk reacted sharply to that decision, accusing Delaware judges of activism and calling on business leaders to re-register their companies in other states. The Supreme Court, in overturning the decision, pointed to procedural shortcomings and misinterpretations in the original verdict, emphasizing that Musk fully met the terms of the 2018 deal.
New Rules in Texas Complicate Lawsuits
It is unlikely that Musk’s new, even more ambitious compensation package, which could potentially reach $1 trillion, will face similar legal battles. The situation changed after Tesla changed its state of incorporation. The company is now incorporated in Texas, where different rules apply for shareholders.
It is undeniable that Musk fully performed under the 2018 grant, and Tesla and its shareholders received the benefit of his performance
Under current Texas law, any party seeking to file a lawsuit regarding corporate governance must own at least 3% of the company’s shares. Currently, only one person meets this threshold – Elon Musk himself. This significantly raises the bar for future legal disputes similar to the lawsuit by Richard Tornetta, a shareholder with nine shares, who initiated the original legal proceedings.
This legal resolution not only increases the wealth of the planet’s richest person but also calls into question the effectiveness of mechanisms to protect the interests of minority shareholders in large corporations. Tesla’s move to Texas and the change in jurisdiction could set a precedent for other companies seeking to avoid similar disputes over executive compensation. The question of balancing the motivation of visionary leaders with fairness for all investors remains open, especially in the era of tech giants whose value is shaped not only by financial metrics but also by the charisma and vision of their founders.
