In a significant legal setback, a Delaware court ruled against the $55 billion compensation package approved by Tesla’s Board of Directors for Elon Musk.
The case, filed by shareholder Richard J. Tornetta on behalf of all Tesla shareholders, alleged breaches of fiduciary duties by Musk and the board regarding the performance-based equity-compensation plan.
Chancellor Kathleen St. Jude McCormick, presiding over the case, characterized the compensation plan as “the largest potential compensation opportunity ever observed in public markets.”
The ruling highlighted a flawed process, citing Musk’s extensive ties with individuals involved in negotiating on Tesla’s behalf, including a 15-year relationship with the compensation committee chair and business relationships with other committee members.
McCormick stated that Musk and his team failed to prove the fairness of the compensation plan during the trial. In response, Musk publicly suggested that incorporating Tesla in Delaware was a mistake and recommended Nevada or Texas for incorporation, initiating a poll to explore changing Tesla’s state of incorporation to Texas.
This legal development places Musk’s fortune at risk, as the $55 billion options represent one of his most valuable assets. Without them, his net worth would decline to $154.3 billion, making him the world’s third-richest person, according to the Bloomberg Billionaires Index. The outcome of this legal battle carries substantial implications for Elon Musk’s financial standing
