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Just a week after Elon Musk\u2019s $55 billion Tesla<\/a> payday was struck down by a Delaware judge, a New York court dismissed a challenge<\/a> to Apple<\/a> CEO Tim Cook\u2019s compensation package, which clocked in at under $100 million. Some coincidence.<\/p>\n At face value, the two cases seem to have a lot in common. Both were shareholder suits waged against some of the highest-paid superstar tech CEOs in the world. And both were filed amid a backdrop of increased public scrutiny over executive compensation<\/a> in recent years, which is near all-time highs across S&P 500 companies<\/a>.<\/p>\n But for all their similarities, from a legal standpoint the two cases are apples and oranges\u2014and Cook was always going to stand a better chance of holding onto his paycheck.<\/p>\n Elon Musk\u2019s Tesla $55 billion compensation package<\/a> made headlines last month after Delaware chancellor Kathaleen McCormick<\/a> ruled in favor of a shareholder who argued that Tesla was paying its CEO an unfairly high amount with the moonshot grant. Plaintiff Richard Tornetta argued that because Musk wields so much power at Tesla and maintains close relationships with his board members, the supposedly independent board of directors vote approving his massive pay scheme<\/a> was anything but.<\/p>\n \u201cChancellor McCormick found that the process for setting Elon Musk\u2019s pay was essentially controlled by Elon Musk,\u201d said Tulane University law professor Ann M. Lipton in an interview with Fortune.<\/em> \u201cThe board didn\u2019t engage in any kind of pushback or real bargaining.\u201d<\/p>\n In response, Musk has threatened to relocate Tesla from Delaware (where almost 70%<\/a> of Fortune 500 companies are incorporated) to Texas, where a more favorable political climate could leave him less exposed to these types of challenges.<\/p>\n While the Musk case was focused on a broad, more abstract legal question related to the Tesla board of directors\u2019 degree of independence, the Cook case resolved yesterday was much simpler.\u00a0<\/p>\n \u201cThe question before Delaware [in the Musk case] was simply, \u2018Was the pay substantively unfair?\u2019 whereas the question in the Tim Cook case was solely, \u2018Was the proxy statement misleading?\u2019\u201d said Lipton.<\/p>\n The Teamsters\u2019 pension fund sued Apple last year<\/a>, arguing that the company had misled investors by misrepresenting Cook\u2019s 2021 and 2022 pay in its proxy statements and paying him more than it had initially proposed.\u00a0<\/p>\n Because Cook and other Apple executives are primarily paid in equity known as RSUs, the company enlists financial models to estimate what Cook\u2019s actual pay will be for shareholders\u2019 approval each year.\u00a0<\/p>\n (For CEOs, being compensated primarily with stock isn\u2019t uncommon. Mark Zuckerberg famously earns just $1 in annual salary,<\/a> but he\u2019s made billions through Meta stock grants included in his compensation package. The Economic Policy Institute found in a report last year that stock-related pay accounts for over 80% of CEO compensation<\/a>.)<\/p>\n The pension fund that sued Cook argued that Apple misrepresented its CEO\u2019s actual compensation package by downplaying the value of his equity. Cook and other Apple executives netted over $90 million in compensation for 2021 and 2022, higher than the $77.5 million estimate the company initially asked shareholders to vote on for approval.\u00a0<\/p>\n (Both of those figures are well below Cook\u2019s current annual compensation; at his own request, the Apple CEO took a 40% pay cut<\/a> last year. That change was approved by shareholders and the Apple board\u2019s compensation committee, which counts former Vice President Al Gore as one of its members.)<\/p>\n The plaintiffs claimed that Apple used an unusual financial model to artificially deflate Cook\u2019s pay estimate, and also buried the compensation tables in a drab, gray section of the proxy statement, where shareholders would be less likely to notice it before casting their Say-on-Pay votes. The court didn\u2019t buy it.<\/p>\n \u201cWhat happened with Tim Cook is very common in public companies,\u201d said Marc Hodak, partner at executive compensation consultancy Farient Advisors. \u201cThey award performance shares based on the face value of the stock. And each of those performance share units has a market value that\u2019s higher than the face value stock at the time of grant.\u201d<\/p>\n One key difference between the two cases was the size of the contested pay package. Musk\u2019s $55 billion award from Tesla was part of the largest compensation plan in corporate history<\/a>. While Cook\u2019s $100 million annual pay is by no means a small sum, it\u2019s on par with his peers. In fact, Apple uses a group of its competitors, including Meta, Netflix<\/a>, Visa<\/a> and Cisco, to benchmark its executives\u2019 compensation. (Notably, it added Tesla to that peer group last year.)<\/p>\n \u201cI don\u2019t have any question that the size and scale of [Musk\u2019s] pay package was a driver, both in terms of the litigation and the decision that we saw,\u201d said Hodak. \u201c[$55 billion] is automatically going to attract an unusual amount of scrutiny.\u201d<\/p>\n Taken together, these two cases do seem to hint at a broader trend towards greater scrutiny of bloated CEO pay\u2014but Lipton advised against reading the tea leaves prematurely.<\/p>\n \u201cElon Musk is beating this drum that everyone should leave Delaware, to suggest that somehow, this is a trend,\u201d said Lipton. \u201cI think this is an Elon Musk problem. That Tim Cook thing, it was a different law. It was a different argument.\u201d<\/p>\n Representatives from Apple did not immediately respond to a request for comment.<\/p>\n<\/div>\n\nSubscribe to the CFO Daily newsletter to keep up with the trends, issues, and executives shaping corporate finance. Sign up<\/a> for free.<\/div>\n