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Tesla Seeks to Revive Compensation Package for Elon Musk (Previously Blocked By Judge)


On April 18th, 2024, the New York Times reported that Tesla is seeking to revive the approximately $56 billion compensation package for Chief Executive Officer (CEO) Elon Musk. The package was voided earlier this year by a Delaware Chancery Court after a shareholder dispute was filed. Here, our West Palm Beach shareholder dispute attorney discusses the key things to know about the dispute and the legal issues.

Background: Musk Compensation Plan Voided As “Excessive” 

In 2018, Tesla CEO Elon Musk negotiated a unique compensation package. Based on the performance of Tesla’s stock, that plan was set to award him more than $55 billion. However, in January of 2024, A Delaware judge voided the compensation plan. The plan was challenged by a shareholder as excessive. The court determined that the compensation package was deemed not in the best interest of shareholders.

 Elon Musk’s compensation package at Tesla was structured to include no upfront salary. Instead, the CEO of the company was offered a potential $55 billion through stock options based on market and operational milestones. The package was contingent upon Tesla achieving certain financial and market capitalization targets—each triggering a portion of stock options that Musk could exercise. Tesla stock is up dramatically since 2018, which is, in part, why the compensation figure is so large.

 Tesla is Seeking Shareholder Re-Certification of Controversial Compensation Package 

Following a Delaware judge’s ruling that voided Elon Musk’s $55 billion compensation package from Tesla, the company’s board and Mr. Musk is now mobilizing shareholder support to potentially re-certify the controversial package. Notably, Tesla has indicated that it plans to shift its state of incorporation from Delaware to Texas—where the law might favor its desired executive compensation structures. That move would also likely involve seeking shareholder approval.

 Company is also Appealing Decision 

For its part, Tesla is still challenging the decision from Delaware Chancery Court judge Kathaleen  McCormick. It is actively appealing the ruling and is asking a higher court in the state to reinstate the compensation plan on its original terms.

 Shareholder Re-Certification Could Itself Be Subject to Litigation 

The dispute over Elon Musk’s proposed executive compensation package is far from over. Indeed, the process of re-certifying Elon Musk’s compensation plan at Tesla—even if it is approved by a majority of the company’s shareholders—could itself face legal challenges. Given the circumstances surrounding the initial approval and subsequent invalidation by a Delaware court, any new attempt to ratify the package might also come under scrutiny. Some shareholders or even a regulatory body could raise concerns about corporate governance and procedural fairness.

Speak to Our West Palm Beach Shareholder Litigation Attorney Today

At Pike & Lustig, LLP, our Florida commercial litigation lawyer has the skills and experience to handle the full range of shareholder disputes. If you have any questions about shareholder rights or shareholder litigation, please do not hesitate to contact us today for a confidential initial case review. We provide shareholder law services throughout South Florida.



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