Tesla's $101.5 Billion Pay Plan for Musk Overturned Again: A Clash of Governance and Executive Power

Elon Musk's landmark compensation package at Tesla has been overturned once more by a Delaware judge, even though Tesla's shareholders had previously voted to reinstate it during the annual meeting on June 13. The Court of Chancery Judge Kathaleen St. J. McCormick reaffirmed her initial ruling from January, asserting that Tesla's board was unduly influenced by Musk when approving the plan in 2018.

The stock option scheme, initially valued at $2.6 billion, had surged to $56 billion when it was annulled, and by the time of the latest verdict, it was valued at a staggering $101.5 billion. This decision poses a significant threat to Musk's financial standing, though he remains the world's richest individual without this compensation package.

The ruling may lead to substantial changes for the future of executive compensation, questioning the autonomy boards have in making such decisions when a charismatic leader like Musk is involved. In response, Tesla has declared the judgment incorrect and intends to appeal. An announcement was made stating, "If not overturned, this decision means that Delaware corporations are managed by judges and plaintiffs' attorneys, not their rightful owners—shareholders."

Musk now has a 30-day window, under Delaware law, to decide whether to challenge McCormick's decision. The state's supreme court automatically reviews all appeals from lower court decisions, unlike the U.S. Supreme Court. The core of McCormick's ruling is the claim that Tesla's board, constrained by conflicts of interest, awarded Musk an excessive remuneration package.

In her extensive 101-page judgment, McCormick wrote, "The board might have chosen to compensate Musk with a series of healthy figures. Instead, it capitulated to his demands." It is expected that Musk will contest this ruling, arguing that he required additional Tesla shares to maintain his control over the company and further develop its ventures in artificial intelligence.

Neither Tesla nor its board, nor Musk personally, have commented on the matter at this point. As this legal battle unfolds, it reflects the growing tension between corporate governance and the outsized influence of top executives.