Legal experts are weighing in on the steps that Tesla and Elon Musk could take following the upcoming shareholder vote on whether to re-approve a massive pay package awarded to Musk in 2018. The vote will determine whether Musk gets to keep nearly $50 billion of performance-based stock options he was granted, potentially increasing his net worth by tens of billions of dollars. However, a lengthy appeal of a January ruling by a Delaware judge, which voided the award and called it the largest potential compensation opportunity ever seen in public markets, is likely to follow, delaying the resolution of the matter.
Forbes has discounted the value of Musk’s pay package by 50% following the Delaware ruling due to uncertainty about the outcome of the appeal. If shareholders vote in favor of re-approving the award, Tesla argues that the original problems with the 2018 grant are cured. Conversely, the investor plaintiff’s position is that a new vote is meaningless and the original findings of the Delaware court stand. Legal experts suggest that even if the shareholders vote to restore the pay package, the original issues may not be resolved.
In the event that an appeal of the Delaware ruling fails, Musk and Tesla could propose a replacement pay package of lesser value to retain Musk’s long-term commitment to the company. Musk, who had previously expressed a desire for more Tesla shares, is also involved in other ventures such as an AI startup and SpaceX. A smaller pay package would fall outside the scope of the Delaware ruling and could potentially face legal challenges. While some scholars argue against awarding Musk compensation for services already rendered, legal experts believe that Musk is likely to receive some form of compensation, potentially around $30 billion.
In a more extreme scenario, Musk could sue Tesla for restitution to obtain fair compensation for his services that were not adequately compensated. Although the exact amount that Musk will receive remains uncertain, Forbes estimates that it will be sufficient to maintain his status as the world’s richest person with a lead of around $5.5 billion over Jeff Bezos. The ongoing legal challenges and potential appeals following the upcoming shareholder vote create additional uncertainty regarding the final outcome of Musk’s pay package and its impact on his net worth.
