A Delaware judge has voided Elon Musk’s $56 billion Tesla pay package, arguing that the company’s board of directors had failed to prove that the billionaire CEO deserved such a high compensation. Musk responded by publicly floating a move to Texas.
The 2018 pay deal was the highest in US corporate history, and made Musk the richest man in the world, with an estimated fortune of up to $220 billion as of last year. Under its terms, Musk was given stock options that would pay out if Tesla hit certain performance targets.
However, Tesla investor Richard Tornetta, who owned just nine shares in the electric automaker at the time, sued Musk and the company, arguing that the billionaire had misled shareholders by telling them that these targets would be more difficult to reach than they were.
The case was finally brought to trial in November, and Chancery Court Chancellor Kathaleen McCormick ruled in Tornetta’s favor on Tuesday. In her 200-page judgment, McCormick argued that Musk had “enormous influence over Tesla” and was therefore able to convince shareholders that such a pay deal was necessary. Even though Musk had excused himself from board meetings on the pay deal, McCormick claimed that five of the six directors who voted on it were “beholden to Musk or had compromising conflicts.”