Judge stops Elon Musk from collecting $55.8 billion from Tesla

In an unexpected turn of events that sent shockwaves through the business world, a Delaware judge has ruled against the $55.8 billion package awarded to Elon Musk by Tesla last year.

The judge described the maneuver as unfair to shareholders and ordered its cancellation.

A Delaware judge voided Elon Musk’s record-breaking $56 billion Tesla pay package, calling it ‘an unfathomable sum’ that was unfair to shareholders https://t.co/LN5qfY3Nqs pic.twitter.com/BwbfTzWECn

— Reuters (@Reuters) January 31, 2024

This decision is a blow to Tesla’s CEO, who recently had a disagreement with the Board of Directors over his stake in the company.

A shareholder argued that a record compensation plan had been awarded inappropriately and called for its cancellation.

McCormick’s detailed 200-page ruling highlighted numerous problems with the compensation process, such as Musk’s power over the board and conflicts of interest.

Mr. Musk’s enormous compensation package, the largest in U.S. corporate history, had not been properly negotiated, it seems.

Ms. McCormick also criticized the role of Todd Maron as Tesla’s General Counsel, a former Musk divorce lawyer. She was concerned about the interaction between Mr. Musk and those representing Tesla, as well as the potential for conflict of interest.

Musk’s agreement was rejected by the judge, whose decision may be appealed to the Delaware Supreme Court. Tesla, Musk and the shareholders are now responsible for implementing the decision.

Tesla shares fell after the announcement. This reflects market concern about possible fallout.

Musk reacted to the decision by taking to his social media platform, X, in a provocative tone, advising people against incorporating in Delaware. The state is renowned for its business-friendly legislation and low taxes. Musk expressed his preference for Nevada and Texas, where Tesla has its headquarters, claiming that they offer a shareholder-friendly atmosphere.

Business and legal circles will be keeping a close eye on the potential implications of this landmark case for corporate governance in the future.