In a historic ruling, a Delaware judge nullified the $56 billion Tesla compensation plan granted to CEO Elon Musk in 2018. The court found the package excessive and concluded that Tesla’s board had overstepped its authority by resubmitting it for shareholder approval. The Elon Musk Tesla compensation package allowed him to purchase Tesla stock at discounted rates upon achieving ambitious milestones.
Legal Fallout and Financial Implications
Tesla was ordered to pay $345 million in legal fees, significantly less than the $6 billion initially sought by the plaintiffs’ attorneys. The company may settle the fees in cash or stock. Analysts predict the ruling could influence executive compensation norms across the industry.
Concerns About Governance
The court emphasized that Tesla’s board lacked independence, as key directors had close personal and professional ties to Musk. The ruling also highlighted misleading disclosures in the proxy statement, which failed to fully inform shareholders about the Elon Musk Tesla compensation package.
Musk’s Reaction and Future Prospects
Musk criticized the decision on X (formerly Twitter), questioning Delaware’s judicial integrity and suggesting Tesla might relocate its incorporation to Texas. The automaker is expected to appeal the ruling to the Delaware Supreme Court next year.