A Delaware judge on Tuesday ruled that Elon Musk’s record-breaking $56 billion Tesla pay package could be tossed, calling the compensation “an unfathomable sum” that was not fair to shareholders, according to a court filing.
Shares of Tesla dropped 3.7% in extended trade.
The ruling swept away the largest pay package in corporate America. The judge found it was negotiated by directors who seemed beholden to their headline-making CEO and the promise of allowing him to share in the company’s enormous growth.
“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?” wrote Kathaleen McCormick of Delaware’s Court of Chancery.
McCormick’s opinion directed the Tesla shareholder who challenged the pay plan to work with Elon Musk’s legal team on an order implementing the decision.
“Never incorporate your company in the state of Delaware,” Musk said in a post on X, the social media platform he bought in 2022. Originally named Twitter, Musk moved its state of incorporation to Nevada from Delaware after his purchase.
Musk’s lawyer did not immediately reply to an email seeking comment.
“Good day for the good guys,” said an email from Greg Varallo, an attorney for the Tesla shareholder Richard Tornetta who brought the lawsuit in 2018.
