Delaware Judge Voids Elon Musk's $56 Billion Tesla Pay Package
A Delaware judge has invalidated the $56 billion pay package awarded to Elon Musk by Tesla in 2018, deeming it an "unfathomable sum" and unfair to shareholders. The decision, subject to appeal, marks the nullification of the largest pay package in corporate America.
The pay package tied Musk's compensation to performance targets like Tesla's share price and profitability. Judge McCormick found that Musk had "extensive ties" with board members and criticised the flawed process leading to the approval of the compensation plan. Tesla and Musk's attorneys failed to prove the stockholder vote was fully informed, and Musk's recent demand for 25% voting control is considered unlikely to gain approval after the judge's scathing critique of the board's lack of independence.
Judge Kathaleen McCormick also criticised Tesla's board for failing to provide oversight, stating, "the board never asked the $55.8 billion question: Was the plan even necessary for Tesla to retain Musk and achieve its goals?" The judge's ruling raises questions about Tesla's corporate structure, with calls for the replacement of at least three directors with independent members.
In a tweet following the ruling, Musk advised against incorporating companies in Delaware and suggested Nevada or Texas. The judge's decision can be appealed to the Delaware Supreme Court, and Tesla's stock dropped about 3% in extended trading following the news.
