Tesla : Elon Musk wins a major judicial victory

After months of legal battle and a saga closely followed by the markets, Elon Musk has just seized a decisive victory. The Delaware Supreme Court has restored the full 56 billion dollar compensation granted by Tesla in 2018.

An extraordinary compensation, but achieved objectives

On Friday, the Delaware Supreme Court restored the compensation plan granted to Elon Musk by Tesla in 2018, estimated at 56 billion dollars. It thus overturned the 2024 decision that had nullified this plan, deeming the sanction too radical.

Recently, Tesla tried to retain Elon Musk by offering him 96 million shares, equivalent to 29 billion dollars. A special board committee was even tasked with designing a new plan to ensure Musk’s presence at the helm of the group.

Originally, the 2018 plan already raised eyebrows. Never before had a leader benefited from such an ambitious, almost provocative compensation mechanism. No fixed salary, no traditional bonus. Only shares, unlocked on condition of achieving a series of industrial and financial objectives deemed, at the time, nearly unrealistic.

Yet, against all odds, Elon Musk ticked all the boxes. Between 2018 and 2024, Tesla went from a promising manufacturer to a global giant. The company flirts with a market capitalization exceeding 1 trillion dollars. The growth was rapid, sometimes chaotic, but undeniable. In this context, the Supreme Court considered that completely canceling the compensation amounted to denying six years of efforts and tangible results.

The judges’ statement is unequivocal. Indeed, deleting the entire plan constituted an excessive sanction. The message is clear. Governance errors cannot erase the massive value creation generated for shareholders.

Delaware retreats, but does not fully exonerate Tesla

The jurisdiction however did not give a blank check to the board. It explicitly recognizes that the approval process for the 2018 plan was flawed. Too much closeness, not enough contradiction. Elon Musk dominated the room, and the board followed.

But whereas the Chancery Court chose the hardline approach in 2024, the Supreme Court opts for a more measured one. Thus, only a symbolic one dollar in damages will be paid to sanction these shortcomings.

On the other hand, the financial consequences are colossal. Tesla can return to Musk 303 million shares, currently valued at around 150 billion dollars. A staggering sum, but one that also reflects the group’s stock market explosion over the period.

Ironically, this judicial victory could bury an even more extravagant project. Anticipating a favorable outcome, the board had proposed a new compensation plan that could climb up to 1,000 billion dollars if new objectives were reached. Shareholders had validated the principle, but on condition: this plan would be abandoned if the 2018 one was reinstated.