The 2018 pay package resulted in spectacular growth for the electric vehicle maker and yet it was determined by the lower Court of Chancery to be unfair to shareholders, who voted twice to approve the plan, Musk argued.
In January 2024, Chancellor Kathaleen McCormick rescinded the pay package of stock options, calling it “unfathomable.” She said it was unfair to Tesla shareholders because the directors who approved it were beholden to Musk and Tesla withheld key information from investors before they voted to approve it.
The pay package had awarded Musk options to buy around 303 million Tesla shares at around $23 each if the company hit performance and valuation goals. Tesla stock closed Tuesday at $230.58.
Musk has said that he wants a greater stake in Tesla or he might develop products outside of the company. The appeal comes as he is dedicating time to President Donald Trump’s government efficiency effort, known as DOGE, which has sparked demonstrations outside Tesla dealerships. The stock has fallen sharply in recent weeks.
She arrived at that standard by finding Musk, who owned 21.9% of the stock at the time the board approved the pay package, controlled the pay negotiations, according to the brief. In addition, she wrongly determined that ordinary business relationships among directors made them conflicted and she erroneously faulted Tesla’s disclosures ahead of the 2018 shareholder vote, according to the brief.
Musk blasted the pay decision and has encouraged other companies to follow Tesla and SpaceX and reincorporate out of Delaware. A handful have left the state or said they might, including Meta Platforms, TripAdvisor, and Trump’s media company.
Fears that a trickle of companies will turn into a stampede, which has been dubbed “DExit,“ prompted the state’s legislature to consider amending its corporate law to better protect controlling shareholders from lawsuits.
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