Chancellor Kathaleen McCormick of the Delaware Court of Chancery stood firm on her January decision to strike down the compensation package, which has now appreciated to approximately $100 billion following recent gains in Tesla's stock price, according to reporting from The New York Times.
The compensation package, initially approved in 2018, would have granted Elon Musk stock options contingent upon Tesla meeting ambitious targets for stock price, sales, and earnings growth. Despite initial skepticism about achieving these benchmarks given Tesla's early struggles with electric vehicle production and profitability, the company's subsequent success enabled Musk to qualify for all the options, which came with a five-year holding requirement.
The legal challenge was initiated by Tesla shareholder Richard Tornetta, who argued that the company's board lacked independence from Musk during the package's development and provided "materially misleading" information to investors. Chancellor McCormick agreed with this assessment in her January ruling, stating that "the process leading to the approval of Musk's compensation plan was deeply flawed."
Delaware court rejects Musk pay package again…not a surprise. We expect the Musk $56 billion pay package now goes to appeal in Delaware courts and eventually could go the Federal appeals process depending on next steps. This continues to be a soap opera playing out in Delaware🍿
— Dan Ives (@DivesTech) December 2, 2024
Attorneys representing Tesla and Musk had contended that a second shareholder vote held in June supporting the package should have paved the way for its reinstatement. However, the court rejected this argument, maintaining its position that the original approval process was inadequate.
