Delaware Court Overturns Elon Musk’s $55.8 Billion Tesla Pay Package for Being Excessive
A Delaware court ruled Elon Musk’s $55.8 billion Tesla compensation plan as excessively large, sparking discussions on executive pay limits.
Essential Insights
- A Delaware equity court deemed Tesla CEO Elon Musk’s $55.8 billion pay package unreasonably high.
- This ruling may affect Musk’s status as the richest individual worldwide.
- Musk recently expressed a desire for greater control over Tesla before accelerating AI development, but the court noted his existing substantial board influence.
- Wedbush analysts predict this verdict could prompt Tesla’s board to develop a revised compensation plan.
Shares of Tesla (TSLA) experienced a rebound after initially dropping when a Delaware court challenged CEO Elon Musk’s $55.8 billion compensation arrangement, labeling it as excessive.
The Delaware Court of Chancery, which handles corporate disputes in the state, sided with an investor lawsuit against Musk’s pay, stating the plan represents "the largest compensation opportunity ever seen in public markets by a vast margin—250 times greater than the median peer package and over 33 times larger than Musk’s previous plan."
The court instructed both parties to collaborate on a final order to resolve the case, including addressing fees and other outstanding issues.
This ruling, which is subject to appeal, could significantly reduce Musk’s fortune. Currently, Musk ranks as the wealthiest person globally, with a net worth of approximately $229 billion, primarily due to his Tesla shares and ownership of X (formerly Twitter).
Notably, Musk recently stated on X that he aims to secure 25% voting control of Tesla before advancing its artificial intelligence initiatives. He reiterated on Tesla’s earnings call his intention to maintain strong influence without full control prior to expanding AI efforts.
Wedbush analysts suggest Tesla’s board might appeal the ruling and propose a new compensation package for shareholder approval, potentially aligning with Musk’s goal of 25% voting power.
Wedbush believes this decision could motivate the board to take proactive steps by crafting a new pay structure that integrates Musk more deeply into Tesla’s future, especially regarding AI strategies, with details expected in the upcoming proxy statement.
As of midday Wednesday, Tesla shares edged up 0.1% to $191.74, marking over a 10% gain in the last year.
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