From Yahoo Finance: 2025-05-20 09:34:00

Tesla is considering a new pay deal for CEO Elon Musk, subject to Texas law instead of Delaware. The $56 billion-plus performance-based deal, invalidated by Delaware’s Chancery Court, is pending appeal. Tesla reincorporated in Texas in response. Other states are vying for Tesla’s business, challenging Delaware’s corporate dominance.

The Texas vs. Delaware legal battle over Musk’s pay may shape future corporate law. Delaware’s strict director independence criteria and Musk’s influence over Tesla’s board led to the pay deal’s invalidation. Texas courts may not align with Delaware’s stance on director independence, potentially affecting future corporate governance decisions.

Tesla’s conflict raises questions about executive compensation and corporate governance. Regardless of the outcome, it could influence how boards approach pay packages. Texas law is flexible on C-suite pay arrangements, but may not reinstate Musk’s disputed plan. Shareholders approved Musk’s pay-performance-based package a second time, entitling him to stock option grants.

Musk’s options, initially worth $56 billion in 2018, have ballooned beyond $100 billion due to Tesla’s stock price surge. If reissued today, they would cost Tesla $50 billion. A replacement deal may include performance metrics, an outright payment, and potential investment or loans to Musk’s other ventures. Tesla could grant Musk “in-the-money” options at a lower exercise price. Tesla CEO Elon Musk is exploring new compensation options after a legal setback. In-the-money pay plans could lead to hefty taxes on Musk. Alternatives like full value stock or restricted stock units are being considered. A shareholder lawsuit invalidated Musk’s previous pay package. The Texas law could impact future disputes.

Musk may face a 57% tax rate under new compensation plans. Tax implications are being carefully considered. Musk could be granted full value stock or restricted stock units. A lawsuit challenged Musk’s previous pay package. A new Texas law impacts shareholder disputes.

Tesla’s compensation committee is working on new pay plans for Musk. Musk has threatened to step down unless his compensation is renegotiated. The Delaware Supreme Court may overturn a previous ruling. Shareholders have benefitted from Musk’s previous pay deal. Texas hopes to attract more businesses with new laws. Several companies, including Meta, Dropbox, Pershing Square Capital Management, Trade Desk, Fidelity National Financial, and Sonoma Pharmaceuticals, have announced plans to move their incorporations. In response to high-profile business departures, Delaware amended its corporation laws to provide more leeway to board members and make it harder for plaintiffs to find evidence for lawsuits.

The amended law in Delaware has extended more leeway to board members in transactions with conflicts of interest and made it more challenging for plaintiffs to find evidence supporting a lawsuit. International investors have trust in the US system of corporate governance, despite concerns raised by Judge McCormick. The court does not comment on pending cases.

Tesla’s regulatory filing indicated a delay in filing its proxy statement, potentially allowing more time to work out a backup pay plan for Elon Musk. The company’s annual shareholder meeting last year was held on June 13. StockStory aims to help individual investors beat the market.

Legal reporter Alexis Keenan covers the latest news for Yahoo Finance. Follow Alexis on Twitter for more updates. Click here for in-depth analysis of the latest stock market news and events affecting stock prices. Stay up to date with the latest financial and business news from Yahoo Finance.

Read more: The Texas Plan B if Delaware won’t reinstate Elon Musk’s Tesla pay haul