Why Elon Musk should get every cent of his $56bn pay package

The moment my children became interested in the US election was not when Taylor Swift declared her support for Kamala Harris, it was when Elon Musk appeared alongside Donald Trump.

They’re late teenagers – young adults – and Musk is their hero. It’s not just that he’s the world’s richest man, although that adds considerable lustre. It’s because he breaks boundaries, not least with his attempts to award himself a $56bn pay package, compensation that a judge this week ruled excessive.

He’s also the future, their future. They admire the Tesla – ‘faster than a motorbike from traffic lights’ one said to me recently. They can take or leave X, it’s not their network. And the space rocket reversing into a dock, as neatly as any car – that video has been replayed in our household countless times.

They’re not bothered by aspects of Musk’s character that make him hard to appreciate. Criticisms that he’s ill considered, temperamental, graceless, self-serving, ruthless, simply do not resonate. He’s a superstar and deserves all the rewards coming his way.

Put his $56bn package to them and they shrug. He’s worth every cent, it’s part of the Elon legend, they say.

They’re right, of course.

It’s true, nobody has ever before been paid that amount, or anything approaching it. Then it was disclosed that ordinary shareholders had not been told about the process that led to him receiving that mega-sum.

So, when judge Kathaleen McCormick in the Delaware court of chancery found against Musk in January, there was widespread harrumphing and nodding: Musk might be trying to set up colonies on Mars but he still must obey corporate law and order. He was only a 22 per cent Tesla shareholder, yet the board had approved the award. Ah, said McCormick, those Tesla directors who negotiated his loot, they were not independent, certainly not as billed. One had a 15-year business relationship with Musk, another went on holiday with the multibillionaire’s family, a third was the lawyer who dealt with his divorce.

This week, she upheld her decision. To the UK eye, that seems odd – a judge hearing their own appeal, but so be it, this is Delaware. Tesla had gone back to her because the company held a second, shareholder vote in June and the result was the same as before: a large majority voting in Musk’s favour. No, said McCormick, the Tesla board could not simply “reset” as if the previous knockback had not happened. “Were the court to condone the practice of allowing defeated parties to create new facts for the purpose of revising judgments, lawsuits would become interminable.” Furthermore, the information Tesla sent to shareholders was “materially false or misleading” because it claimed the second vote could override the early decision of the court.

Musk’s verbal attacks on the judge are characteristically head-on, goading McCormick and undermining the stature of the court to the point where she had no choice but to declare against him.

But that misses the point. Shareholders may not have been furnished with the facts before, but when they voted for the second time they were fully aware of all the relevant information. That’s what they wanted to do, that’s their choice. It’s not illegal, so who is a judge to say otherwise?

It’s possible to fall back on standard corporate practice and ask why, having seen the $56bn thrown out by a judge in January, the directors did not reconvene and say to Musk he had to lower his sights and agree to a reduced figure that would not give a judge palpitations. You can say it’s because they’re hardly objective. But approval was their wish and the wider shareholders, aware of this, were still happy to proceed.

The company was able to cite Tesla’s rocket-fuelled stock price to justify the move. That’s nice to have, but it should not mask the argument. The simple truth is that Tesla wants Musk to receive his bounty. Some may consider it preposterous; let them. Just because it’s huge, does not make it improper, and Tesla, now at least, appears to be playing by the book (with that caveat about telling shareholders the judge would overturn her earlier verdict).

A second appeal now looms, to the Delaware Supreme Court. It’s hard to see how they cannot declare for Musk. His pay packet might stick in craws but, as my kids would say, get over it.