Tesla CEO Elon Musk has been hit hard in recent days when his $55 billion compensation package was overturned by a Delaware judge, which could affect his status as the world's richest man. Musk expressed anger and displeasure at this, posting on social **: "Never register your company in Delaware. ”
The compensation package was questioned
Musk's compensation package was created for him by Tesla in 2018 to motivate him to lead Tesla to achieve a series of financial goals. According to the plan, if Tesla achieves these goals, Musk will receive option awards in batches, with a total value of about $55 billion. These option awards are the main source of Musk's wealth, and his current net worth is about $204 billion, making him the richest person in the world.
However, the compensation package was not approved by all Tesla shareholders, with one shareholder named Richard Tornetta filing a lawsuit in the Delaware Court of Chancery in 2018, claiming that Musk's compensation was too high to serve the interests of the company and its shareholders. He also accused Musk of influencing the board's decision on his compensation through his close relationships with board members, including his brother.
The judge's decision is invalid
After a three-year lawsuit, Judge Kathaleen McCormick ruled on Tuesday that Musk's compensation package was invalid and that Tesla's board of directors had failed to prove that it was fair. The judge found that Tornetta had proven that Musk "controlled Tesla" and that the process by which the board approved his compensation was "grossly flawed." The judge noted that Tesla offered little reason at trial as to why Musk was being given such a large reward, and that Musk was too close to some of the board members to independently represent the interests of shareholders.
The judge's ruling means that Tesla will need to rework a new compensation package for Musk, or appeal to the court's decision. This also means that some of Musk's wealth is now in a state of uncertainty, and if he loses these options, his net worth will shrink significantly to $154.3 billion, and his ranking in the global rich list may fall to third place.
Musk lashed out at Delaware
Musk was clearly very unhappy with the judge's ruling, posting on platform X: "Never register your company in Delaware. He also advises companies that want to let shareholders decide things to register in Nevada or Texas. Musk himself lives in Texas, where Tesla is building a new factory.
Musk's dissatisfaction with Delaware is not the first time, he once complained in an interview in 2023 that Delaware does not allow listed companies to have a multi-ownership structure, which allows founders or management to have more voting rights without shareholder interference. Musk said at the time that if he had known about this, he would not have registered his Tesla in Delaware.
Delaware is one of the most popular places to incorporate companies in the United States, with more than half of all publicly traded companies in the United States registered in the state, including Apple, Amazon, Google, and others. Delaware's legal system is considered corporate-friendly and conducive to protecting the interests of the corporation rather than the interests of the shareholders. This time, however, the Delaware judge sided with the shareholders and dealt a heavy blow to Musk.
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