Musk's status as the world's richest man hangs in the balance, and the $55 billion sky-high salary package was overturned by the court
Finance Associated Press, January 31 (edited by Bian Chun) Tesla CEO Elon Musk has just gotten bad news, which may jeopardize his status as the world's richest man.
On Tuesday, a Delaware judge invalidated Musk's $55 billion compensation package, ruling that Tesla's board of directors had failed to prove that the compensation plan was "fair."
Previously, Tesla shareholder Richard Tornetta filed a lawsuit with the court, claiming that Musk's $55 billion compensation was exorbitant. The shareholder also said that Musk influenced the board's decision to develop his compensation plan through his close personal relationships with board members, including his brother.
According to Delaware's Court of Chancery Judge Kathaleen McCormick's ruling, Tornetta has proven that Musk "controls Tesla" and that the board's process for approving his compensation was "seriously flawed."
Mr. McCormick said Tesla gave little reason at the trial as to how it had agreed to the huge rewards in its compensation package, and that Musk was too close to some of its board members to truly act independently.
McCormick noted that her ruling was contingent on the finding that Musk controlled Tesla, not the company's board and shareholders, at least in setting his compensation.
Musk currently directly owns about 13% of Tesla. Earlier this month, Musk said he wanted to get 25% of Tesla's voting rights to ensure that he had enough influence within Tesla, otherwise he would rather build AI products outside of Tesla.
McCormick also wrote in the ruling that the plaintiffs and defendants will negotiate on the form of enforcing the final order of this award and submit a joint letter identifying all issues, including the costs that need to be resolved, in order to conclude the matter at trial.
Tesla's shares tumbled more than 3% in after-hours trading on Tuesday following the ruling. Tesla's stock price edged up 0.35% to close at $191.59 during the day's regular trading session, with a total market capitalization of $600.3 billion.
In response to the judge's ruling, Musk responded on social media late Tuesday afternoon, saying, "Never register a company in Delaware."
Musk's status as the richest man hangs in the balance?
Tesla's CEO compensation package awarded to Musk in 2018 was the largest in the company's history, which helped Musk become a billionaire and the richest man on the planet. Musk not only owns Tesla, but also SpaceX, Solar City, Neuralink and many other well-known companies.
According to the compensation package, if Tesla meets a specific financial goal, Musk will unlock the option award in batches. Tesla confirmed in early 2023 that Musk had received the last remaining options granted to him by the 2018 compensation package.
The latest ruling means that Tesla will need to draw up a new compensation package for Musk, although the company can appeal. It also means that part of Musk's wealth is now in uncertainty.
According to the Bloomberg Billionaires Index, Musk's latest net worth is about $204 billion, regaining the first place on the world's richest list. Much of that wealth comes from his stake in Tesla.
Musk has already taken all the option awards, with a total value of more than $55 billion. Excluding these assets, his net worth would fall to around $150 billion, dropping him to third place in the list of the world's richest people.
(Finance Associated Press, Bian Chun)