Slaven Vlasic
Update 9:43pm: Elon Musk shares commentary on X.
After a shareholder lawsuit challenged the approval process, a Delaware judge has voided Elon Musk’s $55 billion pay package at electric vehicle maker Tesla (NASDAQ:TSLA). The verdict caused Tesla to drop 1.8% in after-hours trading.
A shareholder had accused Musk and the board of securing the exorbitant pay package without due diligence. The lawsuit contended that the compensation committee and board, swayed by Musk’s influence, allowed him to become a highly paid part-time CEO.
Chief Judge Kathaleen St. J. McCormick of the Delaware Chancery Court expressed her skepticism about the board’s oversight in her opinion: “Swept up by the rhetoric of ‘all upside, or perhaps starry-eyed by Musk’s superstar appeal, the board never asked the $55.8 billion question: Was the plan even necessary for Tesla to retain Musk and achieve its goals?”
Musk defended himself in a court hearing in November 2022 but has responded to the court ruling with a post on X, advising against incorporating companies in Delaware. “Never incorporate your company in the state of Delaware,” the billionaire wrote in a posting on X.
Referring to the ruling, Judge McCormick stated, “The parties are to confer on a form of final order implementing this decision and submit a joint letter identifying all issues, including fees that need to be addressed to bring this matter to a conclusion at the trial level.”
The colossal pay package was approved in January 2018 and was structured to start at $0, increasing based on specific market cap milestones for Tesla, with the pinnacle being a $650 billion valuation. At the time, The New York Times referred to the package as “the boldest pay plan in corporate history.”
