Elon Musk’s Tesla pay package has been voided by a Delaware Judge after the case was ruled in favor of the plaintiff, a shareholder who challenged the validity of the amount of the payday.
Judge Kathaleen McCormick ruled in the Delaware Court of Chancery that Musk’s pay package did not meet the standard of a fair price.
A 201-page opinion written by Judge McCormick breaks down her thoughts on Musk’s massive pay package:
“With a $55.8 billion maximum value and $2.6 billion grant date fair value, the plan is the largest potential compensation opportunity ever observed in public markets by multiple orders of magnitude—250 times larger than the contemporaneous median peer compensation plan and over 33 times larger than the plan’s closest comparison, which was Musk’s prior compensation plan.”
She eventually ruled the “unfathomable sum” was not reasonable.
Shareholder Richard Tornetta brought on the lawsuit, challenging that it was not helpful to those who have invested in the company.
They said that instead, it was only beneficial for Musk, who said the billions of dollars that were set to be awarded would help move forward his mission to save humanity and gain access to Mars.
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Tesla executives, including Antonio Gracias, said Musk’s massive payday was actually beneficial to shareholders because it ensured the CEO would work toward growing the company and lead it to be successful. This was argued to be a benefit for shareholders.
However, Tornetta’s attorneys said Tesla executives refused to acknowledge the goals, or tranches, that Musk needed to achieve to win the massive payday, were easier to attain than what was led to believe.
They also stated that Musk’s focus should be on Tesla and not other companies and that the pay package should be smaller and more reasonable.
Musk’s pay package granted stock option awards that would give him access to buy more shares at a significant discount. Musk was required to lead Tesla to operational and financial goals.
He achieved all 12 tranches, working for no salary and only depending on the company to move forward and reach those operational and financial goals.
Despite doing this, Judge McCormick ruled in the Plaintiff’s favor:
“…judgment is entered in Plaintiff’s favor. The parties are to confer on a form of final order implementing this decision and submit a joint letter identifying all issues, including fees, that need to be addressed to bring this matter to a conclusion at the trial level.”
Musk responded to the ruling on Tuesday afternoon:
Never incorporate your company in the state of Delaware
— Elon Musk (@elonmusk) January 30, 2024
The Delaware Supreme Court can appeal the decision.
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