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In what is a huge setback for Elon Musk, the Delaware Court of Chancery has again struck down the Tesla CEO's mammoth pay package, jeopardizing his active role in steering the EV giant.
Judge McCormick decided to stick with her original finding in January that the company’s board was "too much under the influence" of Elon when it adopted the plan in 2018.
The stock options package, initially worth $2.6 billion, would now be worth $101.5 billion at Monday’s… https://t.co/eYfRtMJ0AO
— Sawyer Merritt (@SawyerMerritt) December 2, 2024
To wit, Delaware Chancellor McCormick has for the second time voided Elon Musk's $56 billion pay package originally approved by Tesla shareholders back in 2018. As per the EV giant's current stock price, that package is worth over $100 billion!
For the benefit of those who might not be aware, Tesla underwent a trial in the Delaware Court of Chancery in 2022, where one of its shareholders, Richard Tornetta, asserted that Elon Musk's 2018 compensation plan should be voided by the court as it was a result of sham negotiations between a beholden board and an increasingly assertive CEO.
At the conclusion of that trial in early 2024, the Delaware Chancery Court Chief Judge, Kathaleen St. J. McCormick, voided Elon Musk's compensation plan, prompting Elon Musk to declare that Tesla would abandon Delaware and reincorporate in Texas. However, Elon Musk's lawyers assured the Delaware Chancery Court that it would continue to retain jurisdiction over the matter of the Tesla CEO's compensation.
To counteract the court's negative ruling, Tesla and Elon Musk opted for a re-ratification under the section 204 of the Delaware General Corporation Law, which provides for rectifying corporate acts that are defective due to a "failure of authorization." Critically, the code does not provide for curing breaches of fiduciary duty, which was the entire raison d'être cited by the court for nullifying Musk's 2018 pay package.
Judge McCormick has ordered @Tesla to pay the attorneys who brought the case $345 million. https://t.co/eYfRtMJ0AO
— Sawyer Merritt (@SawyerMerritt) December 2, 2024
Well, this brings us to today when Musk's ill-fated pay package has been terminated for the second time. Tesla will also have to pay Tornetta's lawyers $345 million as a fee award.
The judge wrote in her opinion:
"Even if a stockholder vote could have a ratifying effect, it could not do so here."
Bear in mind that Elon Musk has previously hinted at abandoning Tesla should he fail to secure an appropriate compensation. Musk has not received a base salary from Tesla since at least 2019.
Oh, and about that "$50 billion pay package":
The strike price for the 304M options was $23.33, so @ $357/share it was roughly a "$101 billion pay package."
Oh well, easy come, easy go!$TSLA
— Stanphyl Capital (@StanphylCap) December 2, 2024
Do note that Elon Musk currently owns roughly 13 percent of Tesla, corresponding to around 412 million shares. The CEO of Tesla also owned around 304 million unexercised stock options as part of his 2018 compensation plan, entitling the EV giant's CEO to around 9 percent of Tesla's 3.2 billion outstanding common shares. These options have now been voided by the court.
About the author: Writing is my one incontrovertible passion. Over the past six years, he has authored over 2,200 distinct articles on financial and tech-related topics, spanning nearly 1 million words. And he has been a member of Wcctech mobile team since 2025. As an alumnus of the University of Toronto, Rotman Commerce Program, I bring nuance, in-depth knowledge, and a unique perspective to every topic that I cover. When I'm not writing, I'm traveling the world, exploring hidden confectionaries and restaurants as an aspiring food connoisseur.
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