In an unusual decision, a Delaware judge struck down Elon Musk’s $55 billion pay package to electric car maker Tesla, siding with a shareholder who sued alleging the sum was excessive.
He decision casts a cloud of doubt on Musk’s enormous fortune, as the 2018 salary plan represents a significant portion of his wealth. If it were completely repealed, Musk would no longer be the richest man in the world and would fall below Amazon founder Jeff Bezos and luxury goods magnate Bernard Arnualt.
Musk subsequently sold tens of billions of dollars in Tesla stock and also secured some of those shares through personal loans, which he used to help finance his other businesses. That includes his $44 billion acquisition of Twitter, now called X. That said, the plaintiffs argue that the tranche of stock in question remains intact.
In a post on X after the ruling was issued, Musk wrote “Never incorporate your business in the state of Delaware.”
In the ruling, Chancery Court Chief Judge Kathaleen St. J. McCormick wrote: “In the final analysis, Musk launched a process of autonomous driving, recalibrating speed and direction along the way as he best saw fit.” it seemed. The process came at an unfair price. And through this litigation, the plaintiff requests a withdrawal.”
“Plaintiff has demonstrated that termination is reasonable, appropriate and practicable,” McCormick wrote. “This grant is not ‘too complex to figure out'[.] Termination is uniquely available: there are no third-party interests involved, the entire grant remains unexercised and undisturbed, and any actions exercised would be subject to the five-year hold period.”
“Defendants argue that termination is a harsh consequence that would leave Musk without compensation,” he continued. “But Musk’s pre-existing shareholding provided tens of billions of dollars for his efforts. And the defendants have offered no viable alternative except to leave the subsidy intact.”
The judge also says that the negotiations between Musk and the board were not adversarial in nature, and the board essentially gave Musk what he asked for, although he was unlikely to leave the company if he had not received the salary package.
The ruling comes at the same time that Musk has publicly stated that he would like the board to authorize another pay package, one that would give him a greater ownership stake in the company.