Judge Blocks Elon Musk’s Multibillion-Dollar Tesla Pay Package Again
A Delaware court has once again blocked Tesla CEO Elon Musk’s massive compensation plan, estimated at $101 billion in stock options, despite approval from Tesla shareholders earlier this year. The ruling, delivered by Delaware Chancery Court Chancellor Kathaleen McCormick, marks the second time Musk’s pay package has been rejected.
Initially approved in 2018 and valued at $56 billion at the time, the package grants Musk 303 million Tesla stock options. In January, McCormick sided with a shareholder who challenged the plan, arguing that Musk and Tesla’s board failed to prove its fairness. Tesla shareholders revisited the issue in June, with 84% of non-Musk-owned shares voting in favour of reinstating the package. However, McCormick remained unconvinced, rejecting Tesla’s motion to reverse her earlier decision.
In her ruling, McCormick stated that shareholder approval alone did not justify the package. “The large and talented group of defense firms got creative with the ratification argument, but their unprecedented theories go against multiple strains of settled law,” she wrote.
The court noted concerns about the board’s close ties to Musk, who admitted to effectively “negotiating against himself” during discussions about his compensation. McCormick acknowledged Musk’s right to be compensated but criticised the package’s terms, writing, “The Board capitulated to Musk’s terms and then failed to prove that those terms were entirely fair.”
Tesla’s board had previously defended the pay package, asserting it was necessary to retain Musk’s full attention on the company. Beyond Tesla, Musk oversees SpaceX, Neuralink, the Boring Company, and X, formerly Twitter.
Musk’s political activities have also drawn attention. He recently contributed millions to Donald Trump’s 2024 presidential campaign and joined Trump on the campaign trail. Earlier this month, Musk and former Republican candidate Vivek Ramaswamy were tapped to lead the Department of Government Efficiency (DOGE), a proposed initiative aimed at cutting federal spending and reducing government regulations.
The ongoing legal battle over Musk’s pay highlights the tension between shareholder interests, executive compensation, and corporate governance at Tesla.
