After months of legal battle and a soap opera closely followed by the markets, Elon Musk has just won a decisive victory. The Delaware Supreme Court reinstated his full $56 billion in compensation awarded by Tesla in 2018.
In brief
- The Delaware Supreme Court reinstates Elon Musk's 2018 compensation plan at Tesla ($56 billion), overturning the 2024 decision deemed too excessive.
- Musk recovers 303 million shares or around 150 billion dollars according to the prices mentioned
- Court recognizes governance errors, but only retains a symbolic $1 in damages
Exceptional remuneration, but objectives achieved
On Friday, the Delaware Supreme Court reinstated the compensation plan awarded to Elon Musk by Tesla in 2018, for an estimated amount of $56 billion. She therefore returns to the 2024 decision which canceled this plan, judging the sanction too radical.
Recently, Tesla tried to retain Elon Musk by offering him 96 million shares, or $29 billion. A special committee of the board of directors was even tasked with devising a new plan to ensure Musk's presence at the helm of the group.
Originally, the 2018 plan was already raising eyebrows. Never before has a manager benefited from such an ambitious, almost provocative, remuneration mechanism. No fixed salary, no classic bonus. Only shares, released on condition of achieving a series of industrial and financial objectives considered, at the time, almost unrealistic.
Yet, against all odds, Elon Musk checked all the boxes. Between 2018 and 2024, Tesla went from being a promising manufacturer to becoming a global giant. The company is flirting with a capitalization exceeding $1,000 billion. The growth has been meteoric, sometimes chaotic, but undeniable. In this context, the Supreme Court considered that completely canceling the remuneration amounted to denying six years of efforts and tangible results.
The judges' formula is unambiguous. Indeed, removing the entire plan constituted an excessive sanction. The message is clear. Governance errors cannot erase the creation of massive value generated for shareholders.
Delaware steps back, but does not completely whitewash Tesla
Jurisdiction did not, however, offer a blank check to the board of directors. She explicitly acknowledges that the 2018 plan approval process was flawed. Too much proximity, not enough contradiction. Elon Musk dominated the room, and the board followed.
But where the Court of Chancery had chosen the strong approach in 2024, the Supreme Court opts for a more measured approach. Thus, only a symbolic dollar in damages will be paid to sanction these breaches.
On the other hand, the financial consequences are colossal. Tesla can return 303 million shares to Musk, currently valued at around $150 billion. A dizzying sum, but which also reflects the group's stock market explosion over the period.
Ironically, this legal victory could bury an even more extravagant project. Anticipating a favorable outcome, the board of directors proposed a new compensation plan that could climb up to $1,000 billion if new objectives were achieved. The shareholders had validated the principle, but under condition: this plan would be abandoned if the 2018 plan came back to life.
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