Billionaire entrepreneur Elon Musk’s status as the world’s richest person may be in jeopardy. That’s due to a Delaware judge voiding his $56 billion pay package from his electric vehicle manufacturer Tesla on Tuesday.
Chancellor Kathaleen St. Jude McCormick ruled that Musk’s compensation was not justified by Tesla’s board of directors. She took issue with his role as CEO in putting the compensation together as well as his personal connections with the committee and board members.
McCormick wrote, “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.”
Musk posted on X, formerly Twitter, “never incorporate your company in the state of Delaware.” He, of course, is also the owner of that social media platform.
The judge cited personal and professional relationships between Musk and those determining his pay package that stretched for decades. She noted a divorce attorney who cried when expressing his admiration for the Tesla owner while being deposed.
McCormick claimed Tesla shareholders who approved the pay package were not privy to key details.
Elon Musk could lose his spot as the richest person in world after a judge ruled to void his $55 billion Tesla pay package https://t.co/PgKst5uktq
— Business Insider (@BusinessInsider) January 31, 2024
Tesla shares dropped 2% in premarket trading after the ruling was announced.
The ruling will certainly be appealed. It negated the largest compensation package in the history of corporate America, which was a 10-year pay agreement for Musk.
The total represents roughly a quarter of Musk’s current $210.6 billion fortune as estimated by Forbes. That total put him about $2 billion in front of French LVMH CEO Bernard Arnault.
McCormick clearly took issue with the board’s award. She wrote that the group may have been “starry eyed by Musk’s superstar appeal” and neglected to determine if such a package was necessary to keep him as CEO.
The litigation was brought by a Tesla shareholder who questioned the pay plan. It will undoubtedly be appealed to the Delaware Supreme Court when the parties work out a final order.
Tesla is the world’s most valuable automaker as investors are banking on the future growth of the company. It recently warned of potentially slower growth as demand in the EV market has softened.
