Elon Musk’s record-breaking $56 billion remuneration package from Tesla was dismissed by a Delaware judge on Tuesday. The judge described the amount awarded by the board of the electric vehicle (EV) manufacturer as “an unfathomable sum” that was unjust to shareholders.
In her 201-page ruling, Kathaleen McCormick of Delaware’s Court of Chancery stated, “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.'”
In extended trading, Tesla’s shares fell by almost 3%. According to Reuters, some investors took advantage of the verdict, believing it would force Tesla to restructure its governance.
The Tesla board has been under fire for not doing enough to monitor Musk, who has resisted authorities and served as the CEO of many businesses at once.
The highest remuneration package in corporate America is declared void by the verdict, which concludes that directors who seemed to be under Musk’s influence structured the share-based compensation.
“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?” McCormick wrote.
She gave the shareholder who had contested the company’s pay plan instructions to collaborate with Musk’s legal counsel in order to carry out the ruling.
Once a final ruling and legal fees are agreed upon, which Tesla will pay, the decision can be challenged.
The decision was made at the same time as Tesla, which valued its position primarily on hopes of future innovations like self-driving robotaxis, stopped expanding amid slowing growth and a reevaluation of demand in the electric vehicle market.
“Good day for the good guys,” said an email sent in 2018 by Tesla stakeholder Richard Tornetta’s lawyer, Greg Varallo.
During the week-long compensation trial in November 2022, Musk stated in his testimony that the funds would be utilized to fund interplanetary travel.
He testified, “It’s a way to get humanity to Mars.” “So Tesla can assist in potentially achieving that.”
