Elon Musk will not receive his massive salary package from Tesla, a court ruled. Shareholder Richard Tornetta had sued over Musk’s pay, and although his lawyers sought $10 billion, the court instead ordered $345 million awarded.
Why Was Musk’s Pay Suspended?
Elon Musk, the world’s richest person, is engaged in a court fight over his pay. A Delaware court recently rejected his $101.4 billion salary package from 2018. That package, linked to Tesla’s stock performance, ballooned alongside the company’s soaring stock value. The court’s ruling prohibits Musk from receiving this salary.
In her ruling, which fills 103 pages, Judge Kathaleen McCormick said Tesla’s board approved the package in 2018 under the influence of Mr. Musk. She called Tesla’s legal team arguments “flawed” and “illegal.” The judge also noted that the board had alternative paths to establish a fair salary and instead chose to accept the terms offered by Musk. She added that shareholder votes could not supersede a judicial ruling.
Musk’s Reaction
In a post on X (formerly Twitter), Musk called the court’s decision “corrupt.” He made the case that judges, rather than shareholders, should decide company matters. Musk also stressed that his investment in Tesla is important for determining the company’s direction and its progress toward artificial intelligence.
Tesla’s Next Steps
Tesla’s board has said that it plans to appeal the ruling in Delaware’s Supreme Court. It could take months, forcing a delay in the outcome.
What Was Musk’s 2018 Salary Package?
Musk’s pay package in 2018 tied his salary to the price of Tesla stock. Depending on Tesla’s market capitalization, revenue growth, and profit performance, he could get stock options granted in 12 portions, each worth 1 percent of Tesla’s stock. As Tesla’s market cap increased by $50 billion and the company enjoyed substantial revenue and profit growth, Musk’s pay also grew markedly.
Some Frequently Asked Questions About Elon Musk’s Pay Package Controversy
Why did the court block Elon Musk’s salary package?
The court ruled that a $101.4 billion 2018 salary package that Tesla awarded to Mr. Musk had been approved by the carmaker under Mr. Musk’s influence and did not adhere to proper legal and corporate governance standards. The judge found the package excessive and flawed.
What was Elon Musk’s pay package for 2018 based on?
Musk’s pay depended on Tesla’s performance. It permitted him to earn stock options in 12 separate tranches, each worth 1 percent of Tesla’s shares, based on milestones such as Tesla’s market capitalization, revenue and profit growth. The package grew much bigger than expected as Tesla’s stock price soared.
What did Tesla say in response to the court’s ruling?
Tesla’s board has opted to appeal the ruling in Delaware’s Supreme Court. This process of appeal is expected to take still several months, pushing out the actual result.
