A judge in Delaware has invalidated the $56 billion compensation package awarded to Tesla CEO Elon Musk, supporting a shareholder’s claim that Musk was excessively compensated. The ruling in Delaware Chancery Court favored Tesla shareholder Richard Tornetta, granting the annulment of Musk’s 2018 compensation agreement.
Judge Kathaleen McCormick ruled that Tornetta was “entitled to rescission.” The parties involved are now required to “confer” and submit a joint letter addressing various issues, including fees, to bring the matter to a conclusion.
Tesla’s stock price experienced a more than three percent decline in after-hours trading following the 200-page ruling.
Elon Musk, responding on X (formerly Twitter), stated: “Never incorporate your company in the state of Delaware” shortly after the decision.
A lawyer representing Musk did not provide an immediate response. Judge McCormick characterized Musk’s 2018 compensation plan as “the largest potential compensation opportunity ever observed in public markets by multiple orders of magnitude.”
The lawsuit involved Musk, Tesla, and certain members of the company’s board of directors.
Greg Varallo, representing the shareholders, expressed gratitude for the court’s decision, calling it “thorough and extraordinarily well-reasoned.” Varallo emphasized that the court’s work would directly benefit Tesla investors by eliminating the dilution resulting from Musk’s substantial pay package.
