A judge has ruled Tesla CEO Elon Musk's $56 billion pay package was too high and needs to be returned.
Five years ago, Tesla shareholder Richard Tornetta filed a lawsuit against the company's board of directors and Tesla, accusing it of not having properly negotiated its compensation package for Musk - totalling a staggering $56 billion+.
And yesterday (30 January), a Delaware court ruled the car manufacturer's board had set an inappropriate amount of compensation for Musk.
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Musk's compensation payment package was given to him in the form of several stock portions, according to Reuters. The stock slices were valued at around $55.8 billion dollars.
His 2018 pay package was formed in a bid to try and make sure he stayed focused on the company, however, the lawsuit accused board members of not being independent of Musk and the Tesla CEO having whispered in their ears regarding the payout amount.
The plaintiff argued Musk should've been offered a smaller package - the company goals much easier to achieve then allegedly conveyed - and been required to focus on his work at Tesla full-time.
According to executive pay research film Equilar's Amit Batish, Musk's package was roughly six times bigger than the total of all 200 highest-paid executives in the year 2021.
Defence lawyers for Tesla's boat responded by saying a committee of independent directors negotiated the amount and it was also then approved by a shareholder vote.
During the trial, Musk tried arguing that the money wasn't simply going to him and would be put to good use.
At a court appearance in November 2022, he testified: "It's a way to get humanity to Mars. So Tesla can assist in potentially achieving that."
Alas, a judge has since ruled 'neither the compensation committee nor the board acted in the best interests of the company when negotiating Musk's compensation plan' and the whole process was 'deeply flawed'.
Judge Kathaleen McCormick continued: "In fact, there is barely any evidence of negotiations at all.
"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?"
She added Musk had 'extensive ties' with the 'persons tasked with negotiating on Tesla's behalf' and accused Musk of launching 'a self-driving process, recalibrating the speed and direction along the way as he saw fit'.
Judge McCormick resolved by requesting for a 'recall' of the payout and she's since ordered Tesla to find a new payout plan for Musk.
Musk has since taken to X - formerly known as Twitter - to respond to the ruling.
The post - uploaded 30 January - reads: "Never incorporate your company in the state of Delaware."
He added: "I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters."
The Tesla CEO - who now risks being knocked off his top spot as richest person in the world - will have the opportunity to appeal the ruling.
UNILAD has contacted Musk's representatives for comment.
Poppy Bilderbeck