Tesla’s headline grabbing CEO Elon Musk is in the news again, this time because his huge Tesla pay package has apparently been voided by a US judge after a shareholder challenged it.
Musk can appeal, but the ruling by a Delaware judge said that the record-breaking $56bn Tesla multi-year compensation package for the CEO was ‘unfathomable’.
Tesla shareholder Richard Tornetta filed the lawsuit five years ago, accusing the company’s chief executive of improperly dictating negotiations around the compensation package and claimed that the board acted without independence.
“Never incorporate your company in the state of Delaware,” Musk responded on social media platform X (formerly Twitter).
Delaware Judge Kathaleen McCormick backed the shareholder.
“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.
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“The incredible size of the biggest compensation plan ever – an unfathomable sum – seems to have been calibrated to help Musk achieve what he believed would make ‘a good future for humanity’,” wrote McCormick in her official opinion.
According to Reuters, Musk said during a week-long compensation trial in November 2022 that the money would be used to finance interplanetary travel.
“It’s a way to get humanity to Mars,” he reportedly said. “So Tesla can assist in potentially achieving that.”
Reuters reported that Tesla directors argued during the trial that the company was paying to ensure one of the world’s most dynamic entrepreneurs continued to dedicate his attention to the electric vehicle maker. Antonio Gracias, a Tesla director from 2007 to 2021, called the package “a great deal for shareholders”, the news agency reported.