Judge Strikes Down Musk’s $56 Billion Tesla Compensation Plan

A Delaware judge recently nullified Tesla CEO Elon Musk’s $56 billion compensation plan from his electric car company.

Chancellor Kathaleen St. Jude McCormick ruled that Tesla’s board of directors did not provide a sufficient explanation for the figure in its pay package intended for Musk, who reportedly played a massive role in formulating the pay package.

The judge called the process of contemplating Musk’s compensation package “deeply flawed,” citing the Tesla CEO’s strong connections with individuals on the company’s board of directors.

“The concept of fairness calls for a holistic analysis that takes into consideration two basic issues: process and price,” the judge wrote in her ruling. “The process leading to the approval of Musk’s compensation plan was deeply flawed. Musk had extensive ties with the persons tasked with negotiating on Tesla’s behalf.”

In response to the judge’s decision, Musk wrote on X, formerly known as Twitter, “Never incorporate your company in the state of Delaware.”

“I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters,” Musk added.

McCormick alleged that the ties between Musk and members of Tesla’s board of directors included decades-long relationships with individuals such as a former divorce attorney “whose admiration for Musk moved him to tears during his deposition.”

The judge claimed that Tesla’s shareholders responsible for approving the whopping pay package were unaware of the information behind it as “the proxy statement inaccurately described key directors as independent and misleadingly omitted details about the process.”

“The price was no better,” McCormick said. “In defense of the historically unprecedented compensation plan, the defendants urged the court to compare what Tesla ‘gave’ against what Tesla ‘got.’ This structure set up the defendants’ argument that the compensation was ‘all upside’ for the stockholders.”

“The defendants asserted that the board’s primary objective with the compensation plan was to position Tesla to achieve transformative growth and that Tesla accomplished this by securing Musk’s continued leadership,” the judge added.

McCormick said Tesla’s latest compensation package was more than 30 times larger than the previous one offered to Musk.

The judge’s ruling comes after Musk challenged Tesla’s board of directors to draft a new compensation plan, providing him with a 25% stake in the company.