Elon Musk tries again to get a $65 billion pay plan back as his revolt roils Delaware

Elon Musk made good on his promise to appeal a controversial decision by a Delaware judge who wiped out his $56 billion performance-based compensation plan as the Tesla (TSLA) CEO leads a revolt that is roiling that state’s politics.

The billionaire along with current and former Tesla directors argued in their appeal to the Delaware Supreme Court on Tuesday that a refusal by Delaware Chancery Court judge Kathaleen McCormick to reinstate Musk’s pay despite approvals from Tesla shareholders contained multiple errors that should lead to the ruling’s reversal.

"Yes, Tesla has a chance" to succeed with its new appeal, said Tulane University law professor Ann Lipton. But “the situation is complicated by the fact that the entire decision has turned into a political football."

McCormick initially voided the pay pact in January 2024 and did so for a second time last December — based on the claims of a single shareholder who alleged in a purported class action lawsuit that Musk’s influence over Tesla made him a de facto controller of Tesla.

McCormick concluded that "extensive ties" between Musk and the people negotiating the pay package and a lack of public disclosure about Musk’s relationships with those who approved the deal made it invalid under Delaware’s corporate laws.

Musk responded by pledging to pull the incorporations of his many companies, including Tesla, out of Delaware.

These so-called "Dexits" were followed by decisions from executives at other companies to reincorporate elsewhere, including Bill Ackman’s hedge fund Pershing Square Capital Management, as some aired their frustrations with Delaware’s powerful Chancery Court.

The recent high-profile departures are roiling a state that for roughly the past century was the dominant place to incorporate because of its so-called corporate-friendly laws, specialized business courts, and ease of filing company documents.

The state's newly elected governor, Matt Meyer, launched a working group to study mounting complaints and lawmakers are trying to push through a bill that would limit investor lawsuits by allowing corporate boards to further insulate their directors, officers, and controlling shareholders from liability.

The measure is not retroactive and therefore wouldn’t absolve Musk or other litigants from past determinations.

Semafor reported last week that the legislation was prompted by warnings from key corporate attorneys that big-name companies, including Walmart (WMT), might move out of the state.

The political drama in Delaware could play a role in what the state’s highest court decides to do about Musk’s pay.