Judge Voids Elon Musk's $56 Bln Tesla Compensation

(RTTNews) - A Delaware judge voided Elon Musk's $56 billion Tesla compensation package, calling it an "unfathomable sum" that was unfair to shareholders, reports said. Chancellor Kathaleen McCormick of Delaware's Court of Chancery ruled that the Tesla CEO cannot keep pay package worth more than $55 billion.

Tesla shares had dropped about 3 percent in extended trade on Tuesday. In pre-market activity on the NYSE on Wednesday, the shares are losing around 3 percent to trade at $186.28.

Meanwhile, Musk said in a post on social media platform X, "Never incorporate your company in the state of Delaware."

Musk can appeal the ruling against the compensation package, which is deemed as the largest pay package in corporate America, to the Delaware Supreme Court .

The ruling comes more than five years after a shareholder lawsuit accused Musk and Tesla directors of of breaching their duties, which resulted in a waste of corporate assets.

The lawsuit asked to void the compensation package, awarded by Tesla Board of Directors, saying that it was dictated by Musk, and negotiated by directors who were not independent of him.

Musk earlier had denied that he dictated terms of the compensation package or attended any meetings where the plan was discussed.

In the ruling, the judge reportedly wrote, "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?"

McCormick further noted that Musk had long business and personal relationship with compensation committee chairman Ira Ehrenpreis and fellow committee member Antonio Gracias.

She said, "The process leading to the approval of Musk's compensation plan was deeply flawed. Musk had extensive ties with the persons tasked with negotiating on Tesla's behalf."

"In the final analysis, Musk launched a self-driving process, recalibrating the speed and direction along the way as he saw fit. The process arrived at an unfair price. And through this litigation, the plaintiff requests a recall," she wrote.

The court's decision comes after Tesla recently warned of slowing growth and the electric vehicle industry is re-evaluating demand.

Musk retains the World's richest person title in Bloomberg's Billionaires Index, with a net worth of $199 billion. Meanwhile, Forbes magazine recently reported that he lost the title to billionaire Bernard Arnault, the founder and CEO of global luxury goods company LVMH.