Elon Musk’s record $56 billion Tesla pay package was blocked by a Delaware judge Tuesday who ruled that the “unfathomable sum” was unfair to the company’s shareholders.
The ruling came in a lawsuit brought by a shareholder in 2018 accusing the Tesla CEO of dictating the package in sham negotiations with directors who weren’t independent of him. “Never incorporate your company in the state of Delaware,” Musk posted on X in the wake of the ruling.
The decision—which can be appealed—kills off one of the largest pay deals in corporate history that had helped to make him the richest man on earth. During a week-long trial, Tesla directors said the package was designed to make sure Musk’s focus remained on the electric auto manufacturer.
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“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.
Musk had denied in trial testimony that he set the terms for the pay deal or attended meetings where the board discussed it. He also testified that the money would go towards the development of interplanetary spaceflight, describing the cash as a “way to get humanity to Mars.”
McCormick ruled that he was a controlling shareholder with a possible conflict of interest and that the deal should be scrutinized to a higher standard. “The process leading to the approval of Musk’s compensation plan was deeply flawed,” McCormick wrote in the decision. “Musk had extensive ties with the persons tasked with negotiating on Tesla’s behalf.”
“Good day for the good guys,” Greg Varallo, an attorney for Tesla shareholder Richard Tornetta, who brought the lawsuit, told Reuters.
“I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters,” Musk posted on X around two hours after his initial Delaware-bashing tweet. He also started a poll asking his followers: “Should Tesla change its state of incorporation to Texas, home of its physical headquarters?”
