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Elon Musk's $55 Billion Tesla Compensation Overturned
A Delaware Court invalidates Elon Musk's $55 billion Tesla compensation, citing undue influence and process flaws.
A Delaware judge has invalidated Elon Musk's extraordinary $55 billion compensation from Tesla. The ruling, issued by the Delaware Court of Chancery on Tuesday, found that Tesla's board of directors improperly approved the pay package, disadvantaging shareholders. This decision led to a more than 4% decline in Tesla's share value in after-market trading.
Influence And Control: Musk's Dominance Challenged
Kathaleen McCormick, the presiding judge, determined that Musk, holding a 22% stake in Tesla, exerted significant influence over the board's decisions. The court concluded that the process leading to Musk's remuneration lacked fairness in both price and procedure. Musk's persona as a "Superstar CEO" was central to his control over the board, influencing the approval of his own compensation plan.
Implications For Musk's Holdings And Wealth
Should this ruling stand, Musk stands to lose options for approximately 303 million Tesla shares, nearly 10% of the company, reducing his ownership to 13%. This outcome diverges sharply from his aspiration to maintain a 25% stake in Tesla. Furthermore, the ruling could jeopardize Musk's status as the world's wealthiest individual, with his fortune estimated at $251 billion at the year's start, surpassing LVMH CEO Bernard Arnault's $201 billion.
Historical Context And Musk's Reaction
The 2018 decision to offer Musk the most significant CEO compensation in public company history has been a subject of contention. The proposed $55.8 billion payout was contingent upon Tesla achieving certain performance targets. This award faced legal challenges from shareholders, who deemed it excessive. In contrast, a 2022 ruling in Delaware found Musk did not unduly influence the Tesla-SolarCity merger. Following the recent ruling, Musk critiqued Delaware's corporate laws, advocating for incorporation in Nevada or Texas, where shareholder decisions hold more sway.
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