Judge orders Elon Musk return his jaw-dropping Tesla pay package

The rulijng comes almost five years after the Tesla boss was awarded a package of more than $80 billion.

The rulijng comes almost five years after the Tesla boss was awarded a package of more than $80 billion. Photo: AAP

Elon Musk just became more than $80 billion poorer after a US court on Wednesday ruled the IT mogul is not entitled to a landmark pay package awarded by Tesla’s board of directors.

Tesla CEO Musk was awarded an incredible US$55.8 billion ($84.7 billion) pay deal by the electric vehicle company in 2018.

A Tesla shareholder filed a lawsuit later in 2018 arguing that company directors breached their duties by approving the pay deal, which it claimed was a waste of corporate assets and unjust enrichment for Musk.

Musk reacted to the ruling on his social media platform X (formerly known as Twitter) saying: “Never incorporate your company in the state of Delaware.”

“I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters,” he added later.

The shareholder’s lawyers had argued that the package should be voided because it was dictated by Musk and was the product of negotiations with directors who were not independent of him.

Lawyers representing the Tesla directors maintained the pay plan was fairly negotiated by a compensation committee whose members were independent, contained performance milestones so high that they were ridiculed by some Wall Street investors, and approved by a shareholder vote that was not even required under Delaware law.

They also argued that Musk was not a controlling shareholder because he owned less than one-third of the company at the time.

Delaware judge Kathaleen St Jude McCormick, however, ruled that Musk was a controlling shareholder at the time with a potential conflict of interest and that the pay package should be subject to a more rigorous standard.

“The process leading to the approval of Musk’s compensation plan was deeply flawed,” McCormick stated in her decision.

“Musk had extensive ties with the persons tasked with negotiating on Tesla’s behalf,” she said.

McCormick found that the only suitable remedy was for Musk’s generous package to be rescinded.

Greg Varallo, lead attorney for the shareholder, praised McCormick’s decision to reverse the “absurdly outsized” Musk package.

-with agencies

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