Elon Musk is at risk of losing his remuneration package of more than 100 billion USD

On December 2, judge Kathaleen McCormick in Delaware ruled to invalidate the remuneration package paid by electric car company Tesla to CEO Elon Musk. This is the second time this year she has done this. In January, she commented that this payment package was “an unbelievable number”, unfair to shareholders and created uncertainty about Musk’s future at the electric car company.

At Tesla, Musk does not receive a direct salary or bonus. According to the agreement with shareholders in 2018, he received an income package including options to buy 304 million shares until 2028, if Tesla met its business results and capitalization goals. This number of options is divided into 12 installments.

As of 2018, the remuneration package was worth $56 billion. However, Tesla shares have increased by 42% since November 5, when Donald Trump was elected US President, bringing the value of this package to 101 billion USD. Musk’s remuneration package is considered the largest in American corporate history.

After this ruling, Musk wrote on X that “shareholders are the ones who decide, not judges.” Tesla also announced that the above ruling was wrong. “We will appeal,” the electric car company’s announcement read.

Tesla shareholders have voted twice to approve the remuneration package, in 2018 and June 2024.

In documents filed with the Delaware Court, the electric car company said that the judge should recognize the results of the vote in June. They asserted that Musk had helped the company grow well and deserved the above compensation.

Meanwhile, Ms. McCormick said that Tesla’s board of directors (BOD) does not have the right to restore Musk’s pay package. She explained that a vote must be held before a verdict is made. Besides, Tesla cannot approve transactions with the participation of beneficiaries. According to the judge, Musk controlled the compensation package negotiation process.

The lawsuit over this payment package was initiated in 2018, by Tesla shareholder Richard Tornetta. Tornetta’s lawyer said Tesla’s Board of Directors never told shareholders that Musk’s targets were so easy to achieve.

In November 2022, during a week-long hearing, Musk said he used the remuneration to fund the space project. “There is a way to send humans to Mars. Tesla can help achieve that,” he explained at the time. Musk is currently the richest person in the world, with a fortune of $353 billion, according to the Bloomberg Billionaires Index.