A Delaware judge has again voided what would be the largest executive compensation package in history—a Tesla (TSLA) pay plan for CEO 澳洲幸运5官方开奖结果体彩网:Elon Musk valued at $101.4 billion (as of Dec. 2, 2024), 33 times larger than the previous record (also held by Musk for a 2018 Tesla deal).

The December 2024 ruling stands despite Tesla shareholders recently approving the package, which has almost doubled from its original $56 billion value because of the company's soaring stock price.

For context, the package's current value exceeds the market capitalization of four-fifths of S&P 500 companies. The ruling has implications not only for Musk's wealth but for how corporate America approaches executive compensation.

Details of Elon Musk's Tesla Pay Package

In 2018, Tesla's board and then the shareholders 澳洲幸运5官方开奖结果体彩网:approved a compensation plan for Musk worth up to around $56 billion at the time. This performance-based package granted Musk 澳洲幸运5官方开奖结果体彩网:stock options contingent upon achieving specific milestones related to Tesla's market capitalization and operational targets.

Each milestone unlocked additional stock options, aiming to align 澳洲幸运5官方开奖结果体彩网:Musk's incentives with the company's growth. Notably, Musk would not receive a salary or any cash bonuses as CEO, emphasizing a commitment to Tesla's long-term success.

Why the Judge Voided the Pay Package

In January 2024, Judge Kathaleen McCormick of the Delaware Court of Chancery rescinded Musk's compensation package. The court found that Musk had "engineered the landmark pay package in sham negotiations with directors who were not independent," leading to a deal that was unfair to shareholders, including those who were plaintiffs in the lawsuit.

"The board never asked the $55.8 billion question," the judge wrote. "Was the plan even necessary for Tesla to retain Musk and achieve its goals?" She called the deal "unfathomable," citing the following reasons:

• Conflicts of interest: The court found that Musk improperly controlled the board process during the negotiation of the 2018 pay package, compromising the board’s independence.
• Material misstatements: Tesla's proxy statement contained multiple material misstatements regarding the pay package vote, which the judge deemed misleading.
• Excessiveness: The package, valued at $56 billion and now worth $101 billion, was deemed unreasonably excessive, even as compensation for meeting ambitious targets.

In its latest ruling, the court noted that allowing companies to "reset" decisions through later votes would undermine judicial accountability and encourage interminable litigation. The flaws in the initial approval process couldn't be remedied retroactively, she argued.

Musk's Likely Next Step

Tesla's lawyers say they plan to appeal to the Delaware Supreme Court in a process that could last at least a year. If the appeal fails, any new compensation agreement would likely require explicit 澳洲幸运5官方开奖结果体彩网:shareholder approval and could involve even larger sums, given Tesla's increased valuation.

Impact on Musk's Net Worth

Even without this compensation, Musk is 澳洲幸运5官方开奖结果体彩网:estimated to be worth over $400 billion as of February 2025. If the plan were reinstated, Musk's net worth would increase by almost 30%, bolstering his lead over fellow billionaires as the world's wealthiest individual.

The Bottom Line

The court's decision to void Musk's Tesla pay package highlights growing scrutiny of executive compensation and corporate governance. As the case moves through the appeals process, its outcome could set important precedents for how companies structure executive pay packages and how much influence CEOs can have in negotiating their own compensation.