Elon Musk, already the world’s richest man, scored another big windfall on Friday when the Delaware Supreme Court overturned a decision that deprived him of a $55 billion pay package that Tesla doled out in 2018 as an incentive for its CEO to take the automaker to new heights.
In addition to adding to Musk’s current fortune of $679 billion, the restoration of the 2018 pay package vindicates his long-held belief that Delaware’s legal system had overstepped its limits in January 2024 when Chancellor Kathaleen St. Jude McCormick rescinded compensation in a case brought by a disgruntled Tesla shareholder.
Tesla did not immediately respond to a request for comment Friday evening.
McCormick’s ruling so infuriated Musk that it prompted him to disdain Delaware and reincorporate Tesla in Texas. That decision also prompted Tesla’s board to look for ways to keep its CEO happy, including a successful effort to persuade the company’s shareholders to firm up the pay package, which was valued at $44.9 billion at the time of the second vote 18 months ago.
With Musk still showing signs of discontent, Tesla upped the ante again this year by crafting another pay package that could pay him $1 trillion if he can lead the automaker on a path over the next decade that raises the company’s market value from its current $1.6 trillion to $8.5 trillion. Shareholders approved that pay package last month, much to Musk’s delight.
It may seem like a tall order, but it also seemed like a long shot for Musk to hit all the targets to qualify for the payout offered in the 2018 package. At the time, Tesla was still struggling to expand its electric vehicle production and burning through cash.
At the time the 2018 pay package was drawn up, Tesla’s market value was between $50 billion and $75 billion. But then the company’s manufacturing problems subsided, allowing it to begin meeting high demand for its vehicles, which in turn increased its sales and stock price to a level that qualified Musk for the large payout he had been promised.
But based on evidence that included Musk’s testimony during a 2022 trial, McCormick ruled that the pay package had been put together by a board that was overly cozy and beholden to the tough Musk.
In its 49-page ruling, the Delaware Supreme Court cited a variety of errors in McCormick’s 2024 decision and declared that the 2018 pay package should be reinstated. It also awarded Tesla $1 in nominal damages.