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Elon Musk’s compensation package for Tesla chief worth $56 billion has been nullified by a judge in Delaware state court. The judge invalidated it and called the package “unfathomable.”
The said pay package was first approved in 2018 and is said to have helped make the Tesla founder and CEO one of the richest individuals in the world. However, Delaware Chancery Court Chancellor Kathaleen McCormick canceled it on Tuesday, Jan. 30.
New Ruling on Compensation
In explaining her ruling, she said that Musk and the EV maker’s board “bore the burden of proving that the compensation plan was fair, and they failed to meet their burden.” Judge McCormick is in charge of the bench trial that ended in November 2022, as per CNN Business.
At any rate, the Tesla chief gained a lot from this compensation package as the 303 million split-adjusted stock options that he received through it are worth $51 billion today when computed based on Tuesday’s closing price. Experts said that this was also how Musk amassed wealth that propelled him to become the richest man in the world at one point.
“We are enormously grateful for the court’s thorough and extraordinarily well-reasoned decision in turning back the Tesla board’s absurdly outsized pay package for Musk,” Greg Varallo, the lawyer of shareholder Richard Tornetta who filed the lawsuit in 2018, said in a statement.
He added that with the voided pay package, investors of Tesla will greatly benefit from it by having the “dilution from this gargantuan pay package erased.”
Elon Musk’s Response
The 52-year-old billionaire did not issue an immediate statement regarding Judge McCormick’s ruling but he posted a message on X, formerly Twitter. In his post, he simply wrote, “Never incorporate your company in the state of Delaware.”
Finally, Reuters reported that the Delaware court’s decision will put a spotlight on the next round of compensation negotiations at Tesla. But then again, the company may still appeal at the Delaware Supreme Court for a possible reversal of the ruling. Several investors and analysts also suggested that Tesla should just present Musk with a new pay package so he can focus on the company’s success instead of being preoccupied or absorbed by his other interests.
Photo by: Tesla Fans Schweiz/Unsplash
