A landmark decision has come from a Delaware judge, nullifying the $55.8 billion pay deal granted to Elon Musk by Tesla back in 2018. The lawsuit challenging the payout, filed by a shareholder, deemed it an excessive overpayment, prompting Judge Kathaleen McCormick to describe the compensation as “unfathomable” and unfair to shareholders.
Elon Musk, in a statement posted on X (formerly Twitter), remarked, “Never incorporate your company in the state of Delaware.” This ruling marks a significant turn in corporate history, as the pay deal was hailed as the largest ever, elevating Musk’s status among the world’s wealthiest individuals.
During the trial, Tesla directors defended the deal, emphasizing its necessity to retain Musk’s unparalleled vision and leadership. However, Judge McCormick’s ruling highlighted flaws in the approval process, questioning the level of shareholder awareness and Musk’s influence over Tesla’s board.
Legal experts, including Brian Quinn from Boston College Law School, underscored the challenges of justifying such a transaction, especially with Musk’s perceived control over Tesla’s decision-making processes.
In her comprehensive 201-page ruling, Judge McCormick criticized the board’s approval process, citing deep flaws and undue influence from Musk’s charismatic persona. The decision brings relief to shareholders like Richard Tornetta, who initiated the lawsuit, signaling a victory for shareholder rights.
While the ruling can be appealed to the Delaware Supreme Court, Tesla’s stock experienced a dip of approximately 2.5% in extended New York trade, reflecting investor reaction to the news.
Musk’s subsequent posts on X stirred further debate, as he suggested considering Nevada or Texas for company incorporation, seeking shareholder input. However, experts caution that corporate decisions should rest with shareholders, not social media followers.
Beyond Tesla, Musk’s sprawling business empire includes ventures like SpaceX, X, and Neuralink. His recent concerns about Tesla’s direction and vulnerability to external influence underscore his desire for greater control, particularly in shaping the company’s investments in AI technology.
As Musk navigates these challenges, the outcome of the legal battle and its implications for Tesla’s future remain subjects of intense scrutiny and speculation in both financial and tech circles.
