A Delaware court has ruled against the ratification of a $55 billion remuneration plan by Tesla’s Board of Directors, which is a threat to entrepreneur Elon Musk. Richard J. Tornetta, a shareholder, filed the lawsuit in April 2023, alleging that Musk and the board had violated their fiduciary obligations by giving the billionaire access to an unparalleled performance-based equity incentive plan.
The proposal is being overseen by Chancellor Kathleen St. Jude McCormick, who called it “the largest potential compensation opportunity ever observed in public markets by multiple orders of magnitude.” Musk had longstanding relationships with important negotiators, such as a 15-year friendship with Ira Ehrenpreis, the chair of the remuneration committee, and a 20-year association with committee member Antonio Gracias, which McCormick highlighted as shortcomings in the approval process in her Post Trial Opinion.
According to McCormick, throughout the five-day trial, Musk and his group could not demonstrate the equity of the remuneration scheme. Elon Musk’s $51.1 billion fortune is now uncertain in the wake of the verdict. Without the options, his net worth would drop to $154.3 billion, placing him third on the list of the world’s wealthiest people per the Bloomberg Billionaires Index.
In his first public response, Musk said in a post on his X account that establishing Tesla in Delaware was a mistake. In addition, he suggested that Tesla incorporate in Texas or Nevada, raising the possibility that Tesla’s incorporation state may shift. Tesla’s physical headquarters are located in Texas; therefore, Musk asked his followers in a poll if the company should incorporate in that state instead.
