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In a striking development that poses grave ramifications for Elon Musk’s status as the world’s richest person, a Delaware court has now voided the Tesla CEO’s 2018 compensation plan, widely believed to be the world’s largest such executive pay package.
Tesla underwent a trial in Delaware in 2022, where some shareholders asserted that Elon Musk’s 2018 compensation plan should be voided by the court as it was a result of sham negotiations, with direct dictation from Musk himself. The plaintiffs argued that the shareholders, who ultimately approved the compensation plan, were never informed that Elon Musk directly dictated the specific terms of the package and that the company’s directors were personally beholden to Musk.
Under the terms of the 2018 plan, Elon Musk was due specific performance-based awards based on Tesla’s market capitalization.
Elon Musk’s $55 billion pay package at Tesla $TSLA was struck down by a Delaware judge after a shareholder challenged it as excessive, a ruling that takes a giant bite out of Musk’s wealth.
The decision means that more than five years after the electric car maker’s co-founder…
— Evan (@StockMKTNewz) January 30, 2024
This brings us to the crux of the matter. The adjudicating Delaware court has now voided the $55 billion compensation package of Elon Musk. Tesla’s board of directors is now required to come up with a new package. Delaware Chancery Court Chief Judge, Kathaleen St. J. McCormick, wrote in her opinion:
“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.”
In the meantime, Elon Musk is likely to lose his status as the world’s richest person. Bear in mind that Elon Musk has already declared that he was uncomfortable working at Tesla with his current voting power. Before today’s ruling, the mega-billionaire owned roughly 13 percent of the EV giant, corresponding to around 412 million shares. Musk also owned around 304 million unexercised stock options as part of his 2018 compensation plan, entitling the EV giant’s CEO to around 9 percent of Tesla’s 3.2 billion outstanding common shares. The CEO of Tesla wants a 25 percent voting control over the EV giant to prevent being “overturned” on occasion.