March 12, 2025 – According to Reuters, Elon Musk has officially filed an appeal on Tuesday local time, seeking to reinstate his $56 billion Tesla compensation package. In January 2024, Chancellor Kathaleen McCormick revoked the stock option compensation plan, citing its “unimaginable magnitude”. She deemed it unfair to Tesla shareholders, arguing that the board members who approved the plan were under Musk’s influence, and Tesla failed to disclose crucial information to investors before the shareholder vote.
Musk contends that the lower court judge made multiple legal errors in her ruling. He highlights that the 2018 compensation plan fueled Tesla’s remarkable growth, yet the Delaware Court of Chancery concluded it was unfair to shareholders, despite their twice-approved votes. “This counterintuitive verdict contradicts established principles of Delaware law, sound corporate governance mechanisms, and basic common sense,” Musk stated.
Under the original compensation scheme, Musk was entitled to purchase approximately 303 million Tesla shares at approximately 23pershare,providedTeslaachievedcertainperformanceandvaluationtargets.AsofTuesday′sclose,Teslasharesweretradingat230.58 each. Tesla noted that developing a new compensation plan of similar magnitude could incur a $25 billion expense, making the appeal a crucial avenue for Musk to reinstate his compensation and ensure his continued dedication to Tesla’s affairs. Musk has expressed his desire to own more shares in Tesla; otherwise, he might pursue product development outside the company.
In the appeal document, Musk and other defendants argue that McCormick erroneously applied a stringent “entire fairness standard” to evaluate the compensation plan. They point out that the judge adopted this standard based on the finding that “Musk held a 21.9% stake and effectively controlled the compensation negotiations when the board approved the plan.” Furthermore, they challenge the judge’s ruling that normal business interactions among directors constituted a conflict of interest and her inappropriate criticisms of Tesla’s information disclosure before the 2018 shareholder vote.
Musk has strongly criticized the compensation verdict and urged other companies to follow the footsteps of Tesla and SpaceX by relocating out of Delaware. Currently, several businesses, including Meta, TripAdvisor, and Trump Media, have either left or are considering leaving the state.
