By Emmett Lindner, Peter Eavis and Rebecca F. Elliott
Elon Musk secured a major victory on Friday when the Delaware Supreme Court reinstated his 2018 pay plan at Tesla, now worth $US139 billion ($209.9 billion).
It was Musk’s second significant financial win at the carmaker in two months. He will retain the Tesla stock options he earned for managing the company over the past several years, while remaining eligible for a new package that could make him the world’s first trillionaire.
Elon Musk will get to keep the Tesla stock options he earned for managing the company over the past several years.Credit: AP
The 2018 package was struck down last year by a Delaware Court of Chancery judge, who ruled that shareholders had not been properly informed about the plan and that Tesla’s board had not acted independently of Musk when making the award. The judge said Musk had effectively overseen his own compensation plan.
Tesla and Musk appealed that ruling, arguing that Delaware courts should honour a subsequent vote by shareholders that reaffirmed the package.
In its unanimous decision Friday (US time), the five-member Delaware Supreme Court wrote that “although the justices have varying views on the liability determination, we agree that rescission was an improper remedy.”
The justices wrote that the rescission of the pay package needed to restore Musk’s financial standing at Tesla to what it was before 2018. However, they wrote, the rescission was improper because it meant that Musk ended up uncompensated for serving as CEO for six years.
While Musk did not issue a statement after the ruling, he replied on X, his social media platform, to several comments that reacted to the news. In one reply, he wrote that he was “vindicated”. In another: “I try not to start fights, but I do finish them.”
A representative of Tesla’s board did not immediately respond to requests for comment.
Greg Varallo, a lawyer for the plaintiff, a Tesla shareholder, said his team was considering next steps and was proud to have participated in “calling to account the Tesla board and its largest stockholder for their breaches of fiduciary duty”.
Thanks to his stake in Tesla, which has a market value of $US1.5 trillion, as well as a number of other ventures, Musk is the world’s richest person, according to the Bloomberg Billionaires Index.
Tesla moved its corporate domicile to Texas from Delaware in 2024, after polling users on Musk’s social media platform, X. His rocket company, SpaceX, and X are also now incorporated in Texas.
Although Delaware has long been a popular destination for incorporations because of its court system, in which judges specialise in corporate law, some companies see states like Texas and Florida as more sympathetic to their interests.
For Musk to obtain the 2018 award, Tesla had to achieve financial and operational goals that were considered demanding at the time. He met those milestones, which included increasing the company’s market value to $US650 billion. The package became a model for other CEOs, and added fuel to the debate over whether corporate chieftains are overpaid.
The judge who struck down the 2018 package wrote in her opinion that the stock Musk already held “provided him tens of billions of dollars for his efforts”.
Last month, Tesla shareholders endorsed the approach of the 2018 package, approving a new pay plan for Musk that could be worth almost $1 trillion if the company meets a new series of ambitious goals under his leadership.
To compensate for reinstating Musk’s 2018 pay plan, the court on Friday offered the plaintiff who challenged it a new award: US$1.
This article originally appeared in The New York Times.
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Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: www.smh.com.au
