Elon Musk's Pay Package Struck Down by Judge

In a significant legal ruling, a judge in the Delaware Court of Chancery has invalidated Elon Musk's multibillion-dollar pay package as chief executive of Tesla. This decision cancels a compensation plan that was initially approved for Musk in 2018 and had a maximum value of $55.8 billion, making it the largest potential pay package ever in public markets.

The lawsuit, brought by Tesla shareholder Richard Tornetta, argued that Musk had too much influence over the terms of his own compensation and that shareholders did not have all the necessary information when they voted for the package.

In her post-trial opinion, Chancellor Kathaleen McCormick concluded that Tesla and Musk had failed to demonstrate the fairness of the compensation plan. As a result of this ruling, the electric-vehicle maker will be required to create a new compensation package for its CEO.

Under the invalidated plan, Musk's stock options were tied to Tesla's market capitalization and certain earnings targets. It is worth noting that Musk is currently the company's largest shareholder, owning approximately 13% of Tesla.

This ruling has significant implications for executive compensation and corporate governance, highlighting the importance of transparency and fairness in these matters.

By Ben Glickman