Tesla shares may be crashing, but Elon Musk’s $55.75 billion pay could still be on the table; here’s how he could pull it off

Tesla CEO Elon Musk's fight to regain his $55.75 billion pay package from Tesla is far from over. Musk has claimed that the judge who cancelled the payout had made several legal errors, The Express reported.

Judge Strikes Down Elon Musk’s Compensation Deal

While the 2018 compensation plan led to substantial growth for Tesla, but the lower Court of Chancery deemed that the deal was not in the best interest of shareholders, according to The Express.

Chancellor Kathaleen McCormick had rejected the stock options compensation in 2024. McCormick even called it "unfathomable" and unfair to Tesla's shareholders, as per the report.

Shareholders Stand By Musk’s Compensation Package

Tesla shareholders had voted twice to support Musk's pay plan. However, according to McCormick, the directors who approved the package were too close to Musk, and also claimed that Tesla did not provide essential information to investors before they voted in favour of it, The Express reported.

Even after McCormick's decision, Tesla shareholders reaffirmed their support for the pay package in June last year. The judge, however, decided to hold her ground, The Express reported.

Musk’s Appeal

Musk and his fellow defendants said that McCormick imposed an overly rigorous legal standard in a recent appeal, The Express reported. They claimed that she employed a standard called "entire fairness," as per the report.

Musk's lawyers countered that McCormick incorrectly presumed he had excessive power over the salary negotiations, given that he controlled 21.9% of shares in Tesla at the time, according to The Express.

According to them, she had wrongly classified regular business relationships among directors as conflicts of interest and also unjustly criticized Tesla's pre-vote disclosures in 2018, as per The Express.

Potential Value of Musk’s Compensation Plan

The compensation deal for which Musk battled would have allowed him to purchase up to 303 million Tesla shares for $22.04 per share, if the firm achieved some performance and market-capitalization benchmarks, as per The Express. Tesla's shares closed at $230.58 on Tuesday, according The Express.

Tesla has said that it would cost the company $24.63 billion to come up with an equivalent value of a new compensation plan, The Express reported.

Musk Demands More

Meanwhile, Musk is demanding larger ownership in Tesla and threatening to explore new products outside the company if his wishes are not granted, The Express reported.

FAQs

Why is Elon Musk fighting for his $55.75 billion pay package?
Elon Musk is seeking to have his $55.75 billion compensation package reinstated after a judge ruled it was unfair to Tesla shareholders.

How much would a new compensation plan cost Tesla?
Tesla estimates that formulating a new compensation plan comparable in value to Musk’s original deal would cost the company $24.63 billion.