The world’s richest man is continuing his fight for a staggering $56 billion pay day from his company Tesla.
Reuters reports billionaire Elon Musk launched his appeal on Tuesday.
He is seeking to overturn a Delaware court ruling that voided his $56 billion Tesla compensation package.
His legal team argued the lower court made multiple errors in its decision to rescind the record-breaking pay deal.
The appeal, filed with the Delaware Supreme Court, claims Chancellor Kathaleen McCormick of the Court of Chancery misapplied corporate law and ignored key shareholder approvals.
Musk’s lawyers argue:
- The court wrongly applied an “entire fairness” standard, which typically applies to controlling shareholders.
- Musk did not have controlling influence over Tesla’s board at the time.
- The judge unfairly concluded that Tesla directors were improperly influenced by Musk.
- The court disregarded the fact that shareholders twice approved the package.
Tesla has warned that replacing the voided pay deal with a new package of similar size could cost the company $25 billion in accounting charges.
The appeal outcome will have major implications for Tesla’s financial strategy and executive compensation practices.
The Case Against Elon Musk’s Pay Deal
In January 2024, McCormick ruled that the 2018 pay package was unfair to shareholders, calling the sum “unfathomable.”
She found that Tesla’s board, which included several of Musk’s close associates, had not negotiated the deal at arm’s length.
The ruling also pointed to inadequate disclosures made to investors before they approved the compensation package.
The court determined that these factors invalidated the deal, despite it being designed to reward Musk only if Tesla met ambitious growth targets.
Broader Implications
Elon Musk has publicly criticized Delaware’s corporate governance system, calling the ruling “crazy” and “corrupt.”
He has hinted at reincorporating Tesla elsewhere, a move that has prompted other companies, including Meta and TripAdvisor, to reconsider their own legal structures.
Musk has already moved another of his companies, SpaceX, to Texas from Delaware.
Delaware lawmakers are now reviewing corporate governance rules to address concerns raised by the case. The appeal will be closely watched by business leaders, investors, and legal experts as it could set new precedents for executive pay and shareholder rights.
