Elon Musk’s $55B compensation package from Tesla voided by judge

DOVER, Del. — A Delaware judge on Tuesday ruled that Elon Musk is not entitled to a compensation package awarded in 2018 from Tesla’s board of directors that is worth more than $55 billion.

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Chancellor Kathaleen St. Jude McCormick of the Delaware Court of Chancery said that Musk had overseen his generous compensation plan with the help of board members and ordered it to be voided, The New York Times reported.

The package entitled Musk to stock options in the company when it reached specific performance targets, according to The Washington Post. Tesla shareholders sued Musk, alleging the process that led to his compensation package was improper.

“Never incorporate your company in the state of Delaware,” Musk wrote on X, formerly known as Twitter.

Never incorporate your company in the state of Delaware
— Elon Musk (@elonmusk) January 30, 2024

Musk later tweeted on the site that he owns that “I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters,” and then created a poll on the site asking his followers to vote on whether he should change his state of incorporation to Texas.

The ruling comes after Musk asked for 25% control over Tesla after he sold more than $39 billion worth of company stock in 2021 and 2022 to help fund his $44 billion acquisition of Twitter, The Wall Street Journal reported.

Musk is the largest shareholder in Tesla, owning 13% of the company’s stock, according to the newspaper.

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Investors were skeptical of Musk’s request for more control, according to the newspaper.

“The process leading to the approval of Musk’s compensation plan was deeply flawed,” McCormick said. After ordering the compensation plan to be voided, she directed both parties in the case to work out how Musk would return excess pay, the Times reported.

Musk’s attorneys argued that the pay plan was fairly negotiated by a compensation committee, adding that its members were independent, according to The Associated Press. They added that the plan contained high-performance milestones that were criticized by Wall Street investors.

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