Wednesday, January 31, 2024
By
Web Desk

Judge tosses out Elon Musk's 'unfathomable' $56bn Tesla pay package

Decision can be appealed once a final order and attorney fees, set to be paid by Tesla, are agreed upon

By
Web Desk
Tesla CEO Elon Musk attends a conference organized by the European Jewish Association, in Krakow, Poland, on January 22, 2024. — Reuters
Tesla CEO Elon Musk attends a conference organized by the European Jewish Association, in Krakow, Poland, on January 22, 2024. — Reuters

A Delaware judge tossed out Elon Musk's record-breaking $56 billion Tesla pay package on Tuesday, calling the compensation granted by the electric vehicle (EV) maker's board "an unfathomable sum" that was unfair to shareholders.

"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 Kathaleen McCormick of Delaware's Court of Chancery in her 201-page opinion.

Shares of Tesla dropped about 3% in extended trade, and some investors seized on the ruling in hopes it might prompt Tesla to overhaul its governance, Reuters reported.

The Tesla board has been criticised for failing to oversee Musk, who has fought regulators and led multiple companies simultaneously.

The ruling nullifies the largest pay package in corporate America, finding the share-based compensation was negotiated by directors who appeared beholden to Musk.

"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 McCormick.

She directed the shareholder who challenged the company's pay plan to work with Musk's legal team to implement the decision.

The decision can be appealed once a final order and attorney fees, set to be paid by Tesla, are agreed upon.

The ruling comes as Tesla halted its expansion amid slowing growth and a re-evaluation of demand in the electric vehicle industry, valuing its position largely on expectations of future breakthroughs like self-driving robotaxis.

"Good day for the good guys," said an email from Greg Varallo, an attorney for Tesla shareholder Richard Tornetta, who brought the lawsuit in 2018.

Musk testified during the 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 testified. "So Tesla can assist in potentially achieving that."