'Defies common sense and' ...: What Elon Musk said in his appeal as he goes to court again to reinstate his $56 billion Tesla pay package

Elon Musk has again launched an appeal to reinstate his record-breaking $56 billion compensation package from Tesla, arguing that a lower court judge committed multiple legal errors when she voided the deal in January 2024. The 2018 pay package, which shareholders approved twice, fueled tremendous growth for the electric vehicle company, but Chancellor Kathaleen McCormick of Delaware's Court of Chancery ruled it was unfair to investors. In the opening appeal brief, Elon Musk and current and former Tesla directors who are co-defendants asserted the judge that McCormick's "counterintuitive" decision "defies settled principles of Delaware law, sound corporate governance, and common sense." They contend she incorrectly applied the stringent "entire fairness" legal standard by concluding Musk controlled the pay negotiations with a 21.9% stake in Tesla and that the directors who greenlit the package had conflicts of interest due to ordinary business ties.

The $56 billion pay deal granted Musk options to purchase approximately 303 million Tesla shares at $23 each if the company met certain performance and valuation targets. With Tesla's stock closing at $230.58 on Tuesday, the package's potential value is immense. Tesla has warned that crafting a new compensation plan of comparable worth could incur a $25 billion charge, making the appeal a key route to restoring Musk's payday and focus on the automaker.

Elon Musk's 'veiled threat'

Elon Musk has hinted he may take his product development elsewhere if he doesn't secure a larger Tesla stake. The appeal coincides with his involvement in President Trump's government efficiency initiative dubbed DOGE, which has triggered protests outside Tesla dealerships and a steep drop in the company's stock price in recent weeks.

McCormick had labeled the pay package "unfathomable" and found Tesla withheld critical information from shareholders before the 2018 vote. Despite shareholders reapproving the deal in June 2024, she declined to reverse her ruling. The appeal brief argues her use of the entire fairness standard gives Tesla investors a "license to sue," noting the case was filed by Richard Tornetta, who held just nine shares in 2018, as a derivative suit benefiting Tesla.

Musk has slammed the pay ruling and urged companies to follow Tesla and SpaceX in reincorporating outside Delaware, a path already taken or considered by firms like Meta Platforms, TripAdvisor, and Trump's media venture. As the appeal unfolds, all eyes will be on whether Musk can reclaim his colossal compensation and keep his attention trained on driving Tesla forward.



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