A Delaware court has canceled Tesla's compensation, which meant Elon Musk lost rights to USD 51 billion worth of shares.
👉 Background: Back in 2018, Elon Musk was granted a $51 billion USD ten-year stock option package. It was the biggest payment to a corporate leader in the history of corporate America. While it shocked investors at the time, it would only be paid if Tesla produced strong results and its stock price jumped to over $600 billion USD.
👉 What happened: Six years later, Tesla is actually worth around $600 billion USD (and has been worth $1.2 trillion at one stage). As a result, all 12 tranches of stock options have started to unlock. But before Musk could cash in, one of Tesla's shareholders took him to court and claimed that investors weren't given enough warning of this compensation.
👉 What else: The court agreed, which meant the share compensation would be cancelled, and he'd lose all rights to $51 billion USD worth of shares. This also means his goal to use this money for "interplanetary travel" has been quashed.
💡One small step for Tesla, one giant leap for corporate America and its shareholders. The highest paid CEO in the US earned $253 million in 2023. Meanwhile, compare that to Elon's nearly-$8 billion in share options
💡While performance-based compensation is a common method to incentivise leaders, the judge found that 5 of the 6 Tesla board members (excluding Elon and his brother Kimball) were conflicted by their personal or business ties to Musk.
💡And this decision (if not appealed) may set a precedent for shareholders to appeal other CEOs and leaders who are on on large pay packages. Watch this space!
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