WILMINGTON--A Delaware judge on Tuesday ruled that Elon Musk's record-breaking $56 billion Tesla pay package could be tossed, calling the compensation granted by the EV maker's board "an unfathomable sum" that was unfair to shareholders. Shares of Tesla dropped about 3% in extended trade. The ruling may sweep away the largest pay package in corporate America. The judge found it was negotiated by directors who appeared beholden to their headline-making CEO, one the world's richest people, and the promise of allowing him to share in the company's enormous growth. "Swept up by the rhetoric of 'all upside,' or perhaps starry eyed by Musk’s superstar appeal, the board never asked the $55.8 billion question: Was the plan even necessary for Tesla to retain Musk and achieve its goals?" wrote Kathaleen McCormick of Delaware's Court of Chancery. McCormick's opinion directed the Tesla shareholder who challenged the pay plan to work with Elon Musk's legal team on an order implementing the decision. The decision can be appealed once the parties agree on a final order and on fees for the shareholder's attorneys, which will be paid by Tesla. "Never incorporate your company in the state of Delaware," Musk said in a post on X, the social media platform he bought in 2022. Originally named Twitter, Musk moved its state of incorporation to Nevada from Delaware after his purchase. Musk's lawyer did not immediately reply to an email seeking comment. "Good day for the good guys," said an email from Greg Varallo, an attorney for the Tesla shareholder Richard Tornetta who brought the lawsuit in 2018. The ruling can be appealed to the Delaware Supreme Court. "The incredible size of the biggest compensation plan ever -- an unfathomable sum -- seems to have been calibrated to help Musk achieve what he believed would make 'a good future for humanity'," wrote McCormick in her 201-page opinion. Musk testified during the compensation trial in November 2022 that the money would be used to finance interplanetary travel. "It's a way to get humanity to Mars," he testified. "So Tesla can assist in potentially achieving that." Tesla's agreement with Musk contributes a significant part of his fortune, which according to Forbes magazine was $210.6 billion, just ahead of LVMH CEO Bernard Arnault of France and his family.
