A Delaware judge has ruled Elon Musk’s massive $56 billion Tesla compensation package invalid, calling the deal an “unfathomable sum” unfair to shareholders. The 2018 pay package helped propel Musk to top richest person lists by awarding stock options based on ambitious market value goals.
But shareholder Richard Tornetta sued, claiming Tesla breached its duty by allowing a package that unjustly enriched Musk. Judge Kathaleen McCormick agreed, deciding directors negotiating the deal on Tesla’s behalf were too closely tied to Musk who already owned 21.9% of the company.
In her ruling, McCormick wrote that directors “never asked the $55.8 billion question: Was the plan even necessary to retain Musk and achieve [Tesla’s] goals?” She ordered the deal to be rescinded, though Musk can still appeal.
Since approval, Musk has sold some Tesla shares to help fund acquiring Twitter, now owning about 13% of the automaker he wants 25% of before feeling comfortable expanding into AI and robotics.
In response, Musk simply tweeted “Never incorporate your company in the state of Delaware” with a poll asking if Tesla should reincorporate in Texas where its headquarters are located.
