Tesla is in court again this week, asking the Delaware Supreme Court to restore CEO Elon Musk’s $56 billion pay package, the largest paycheck in corporate history. The lawsuit is a follow-up to a January 2024 Chancery Court ruling that struck down the 2018 shareholder-approved pay agreement as flawed and lacking in board independence.
The appeal, launched on Wednesday, marks the final phase of a highly scrutinized legal battle that may redefine not only Tesla’s leadership hierarchy but also the influence Delaware has as the center of American corporate governance.
Musk’s 2018 pay package tied his compensation to Tesla’s stock market value and key business milestones. The agreement, if fully implemented, would exceed the lifetime earnings of tech moguls such as Mark Zuckerberg and Tim Cook. The Chancery Court, however, previously decided that Musk failed to achieve all the performance goals, and the Tesla board’s approval process was ‘deeply flawed’.
Tesla lawyers contend that shareholders had ‘full knowledge’ and offered ‘overwhelming support’ for the scheme when they voted. “This was the most knowledgeable stockholder vote in Delaware history,” said Tesla attorney Jeffrey Wall to the court.
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The decision in this case has far-reaching consequences that extend well beyond Tesla. Delaware, which is home to more than half of America’s publicly traded companies, has long been regarded as the gold standard of corporate law. Legal specialists, however, caution that if the Supreme Court confirms the lower decision, it will restrict executive compensation control and lead some corporations to reconsider their Delaware registrations.
Musk’s leadership remains at the heart of Tesla’s identity, innovation, and market confidence. Not locking in the pay deal may strain Musk’s commitment to Tesla and impact investor sentiment. In contrast, the Tesla board has proposed a new 10-year compensation package worth as much as $878 billion in stock, linked to ‘Mars-shot’ objectives like robotics and autonomous driving breakthroughs.