Musk Wins US Court Appeal of $56bn Tesla Pay Package

AFP/APP

New York: A Delaware appeals court on Friday cleared the way for Elon Musk to receive a long-contested $56 billion Tesla pay package, overturning an earlier ruling in the protracted legal battle.

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

In two rulings delivered in 2024, McCormick had invalidated Musk’s 2018 compensation package, which was once considered historically large but has since been eclipsed by the tech billionaire’s more recent Tesla pay deals.

The five-judge appeals panel ruled that McCormick erred in ordering a rescission — the complete cancellation of the pay package — noting that Musk had fulfilled his obligations under the 2018 grant.

“It is undisputed that Musk fully performed under the 2018 grant, and Tesla and its stockholders were rewarded for his work,” the court said in its ruling as it reversed the rescission.

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

In January 2024, following a five-day trial, the Court of Chancery struck down the package, calling the approval process “deeply flawed” and stating that Tesla’s board was susceptible to manipulation by Musk, described as the “paradigmatic ‘Superstar CEO’.” McCormick reaffirmed that decision in December 2024 after an appeal.

Tesla’s board, however, consistently backed Musk throughout the legal dispute. In August, it approved an interim compensation award worth around $29 billion and later unveiled a new pay package valued at up to $1 trillion.

On November 6, Tesla shareholders overwhelmingly approved the latest compensation plan, which is linked to a series of performance and valuation benchmarks.