Elon Musk launches appeal to restore $56 billion Tesla payday
The Hindu
Elon Musk kicked off his appeal to try to restore his $56 billion payday from Tesla.
Elon Musk kicked off his appeal to try to restore his $56 billion payday from Tesla on Tuesday, claiming a lower court judge made multiple legal errors in rescinding the record compensation.
The 2018 pay package resulted in spectacular growth for the electric vehicle maker and yet it was determined by the lower Court of Chancery to be unfair to shareholders, who voted twice to approve the plan, Musk argued.
"That counterintuitive result defies settled principles of Delaware law, sound corporate governance, and common sense," said the opening appeal brief by Musk and the current and former Tesla directors who are defendants in the case. In January 2024, Chancellor Kathaleen McCormick rescinded the pay package of stock options, calling it "unfathomable."
She said it was unfair to Tesla shareholders because the directors who approved it were beholden to Musk and Tesla withheld key information from investors before they voted to approve it. In June, Tesla got shareholder approval for the pay package for a second time, but the judge rejected that as grounds for reversing her ruling.
The pay package had awarded Musk options to buy around 303 million Tesla shares at around $23 each if the company hit performance and valuation goals. Tesla stock closed Tuesday at $230.58. Tesla has said creating a new pay package of similar value could result in a charge of $25 billion, making the appeal an important avenue for restoring Musk's compensation and keeping his attention on Tesla.
Musk has said that he wants a greater stake in Tesla or he might develop products outside of the company. The appeal comes as he is dedicating time to President Donald Trump's government efficiency effort, known as DOGE, which has sparked demonstrations outside Tesla dealerships. The stock has fallen sharply in recent weeks.
In the appeal brief, Musk and the other defendants said McCormick wrongly applied a very difficult legal standard known as entire fairness to assess the pay package.
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