Judge Invalidates Elon Musk’s $51 Billion Tesla Package

A substantial, multi-billion-dollar compensation package for Tesla CEO Elon Musk has been invalidated by a Delaware state court judge.

The 2018 pay arrangement, instrumental in propelling Musk to one of the world's wealthiest individuals, was dismissed by Delaware Chancery Court Chancellor Kathaleen McCormick.

The ruling, delivered on Tuesday, stated that Musk and the Tesla board failed to substantiate the fairness of the compensation plan, placing the burden of proof squarely on their shoulders.

The colossal pay package included 303 million split-adjusted stock options, currently valued at $51 billion based on Tuesday's closing price, with a modest exercise price of $23.34 per share.

Shareholders, who instigated the legal action, contended that the stock options were excessively generous and raised concerns about the independence of Tesla's board, arguing that its members were too closely aligned with Musk to safeguard shareholder interests.

Their case also asserted that the financial targets required for Musk to qualify for each of the 12 tranches of stock were not the ambitious performance goals presented to shareholders.

Instead, they claimed these milestones mirrored internal growth projections shared with financial institutions and rating agencies.

Attorneys for Musk and the Tesla board defended the pay package by pointing to its approval through a shareholder vote, where, excluding votes from Musk and his brother, 73% of the shares supported the arrangement.

Additionally, they argued that Tesla shareholders had witnessed a substantial increase in the value of their shares since the package was granted.

Musk, who receives no cash salary or bonus, would be left uncompensated if the package was invalidated, they contended.

However, Chancellor McCormick rejected this argument, highlighting that Musk's existing equity stake had already provided him with tens of billions of dollars for his contributions.