Elon Musk denied pay package from Tesla

Elon Musk has been denied a massive pay package from electric car company Tesla, where he is the CEO.
elon musk denied pay

Elon Musk has been denied a massive pay package from electric car company Tesla, where he is the CEO.

Shareholders took legal action in the state of Delaware, where Tesla is registered, saying Musk’s pay packet of $US56 billion (the biggest in the U.S.) was too large.

The court sided with the shareholders, rejecting Musk’s arguments over why he deserved the compensation.

Pay agreement

Musk doesn’t take a salary from Tesla. Instead, under an agreement reached in 2018, for every $US50 billion that Tesla grows in value, Musk gets 1% of company shares.

That milestone would need to be reached 12 times to get the entire pay packet.

This was set out along with some other growth targets.

Company value

When the pay deal was struck between Tesla’s board and Musk in January 2018, the value of Tesla was approximately $US58 billion.

Since then, the company has grown significantly, reaching an estimated $1.1 trillion at the end of 2021.

That means, under his pay deal, Musk met the targets and was entitled to shares worth about $56 billion – the largest pay package in the U.S.

One of Tesla’s shareholders, Richard Tornetta, argued the pay package was too big. He also argued the targets were too easy to achieve, raising questions about the independence of the board members who approved his pay deal.

In 2018, Tornetta filed a legal challenge, saying the board didn’t act appropriately by not offering Musk a smaller package and looking for another potential CEO.


In her 201 page opinion, Delaware Judge Kathaleen McCormick sided with Tornetta. She concluded the $56 billion pay he was owed as CEO was an “unfathomable sum”. She found Musk had too much control over how his pay package was reached.

McCormick added Tesla failed to prove Musk’s “less than-full time efforts for Tesla were solely or directly responsible for Tesla’s recent growth”.

Musk owns multiple companies: X (formerly Twitter), SpaceX, and microchip developer Neuralink.

Elon Musk’s reaction

Tesla is registered and incorporated in the U.S. state of Delaware, where the court case took place. Some big companies, including Google’s parent company Alphabet, are also registered in Delaware.

Shortly after the court’s decision was released, Musk posted on X advising people to set up a company in states outside Delaware.

He launched a poll asking users to vote whether the company should completely move to Texas – the location of Tesla’s headquarters.

Become smarter in three minutes

Get the daily email that makes reading the news actually enjoyable. Stay informed, for free.

Be the smart friend in your group chat

Join thousands of young Aussies and get our 5 min daily newsletter on what matters in your world.

It’s easy. It’s trustworthy. It’s free.