Chancellor Kathaleen St. Jude McCormick, Head judge of Delaware’s Court of Chancery, ruled on Tuesday that a 2018 pay package for Tesla CEO Elon Musk is invalid because it overcompensates the tech engineer and businessman to the detriment of shareholders.
The pay deal for Musk, which the Tesla CEO negotiated in 2018, helped make him the richest man in the world. The judge for the Delaware state court said in her ruling that Musk and the Tesla board “bore the burden of proving that the compensation plan was fair, and they failed to meet their burden.” Tesla stock dipped 2% following news of the decision on Tuesday.
“We are enormously grateful for the court’s thorough and extraordinarily well-reasoned decision in turning back the Tesla board’s absurdly outsized pay package for Musk,” said Greg Varallo, a lawyer for one of the plaintiffs, in a statement following Judge McCormick’s decision.
Elon Musk’s 303 million share split-adjusted stock options for Tesla shares that he earned as part of the pay plan are worth around $51 billion today after Musk’s cost of $23.34 per share to exercise them. According to the judge overseeing the case, the package is 30 times larger than the previous compensation plan for Musk.
Musk tweeted sardonically on X, formerly Twitter, Tuesday, “Never incorporate your company in the state of Delaware.”
Never incorporate your company in the state of Delaware
— Elon Musk (@elonmusk) January 30, 2024
In a follow up post later that day, Musk said, “I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters.” Meanwhile, the Tesla CEO ran a poll on X asking if Tesla should change its state of incorporation to Texas, where he moved Tesla’s headquarters in December 2021 after rankling with the state of California over Covid-era policies.
Conservatives like Charlie Kirk, founder and CEO of TurningPoint USA, who don’t believe it is the role of government to decide when a citizen has made too much money, bristled at the Delaware court’s decision. “Elon Musk has increased the value of Tesla by more than ten times since he entered into the pay package,” Kirk wrote in an X post.
“He is by a country mile the most successful CEO in America, and it’s impossible to imagine Tesla succeeding as it has without Musk helming it,” Kirk added.
A federal judge has thrown out Elon Musk’s pay package as CEO of Tesla, on the grounds that Musk made so much money it was “unfair.” Instead, the judge says that Musk should have worked for free the past five years.
Elon Musk has increased the value of Tesla by more than ten…
— Charlie Kirk (@charliekirk11) January 30, 2024