(CTN News) – A judge in the US state of Delaware has overturned a $56 billion (£44 billion) pay package awarded to Elon Musk by the electric vehicle manufacturer Tesla in 2018.
The case was launched by a stockholder who claimed it was an overpayment.
Judge Kathaleen McCormick concluded that the Tesla board’s ratification of the remuneration package was “deeply flawed.”
Elon Musk wrote: “Never incorporate your company in the state of Delaware” in a post on X, which he owns and was previously known as Twitter.
In a another piece, he stated, “I recommend incorporating in Nevada or Texas if you want shareholders to make decisions.” He then asked his followers to vote on whether Tesla should “change its state of incorporation to Texas, home of its physical headquarters”.
The pay contract was the largest in business history, helping Elon Musk become one of the world’s richest people.
During the week-long trial, Tesla executives claimed the agreement was made to ensure that one of the world’s most creative entrepreneurs continued to devote his time to the company.
However, the judge decided that Tesla and Elon Musk’s lawyers “were unable to prove that the stockholder vote was fully informed”.
In her 200-page opinion, Judge McCormick described the payout as “an unfathomable sum” that was unfair to shareholders.
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The judge also stated that the compensation package was arranged by Tesla’s board, who were “swept up in the rhetoric” surrounding Mr Musk’s “superstar appeal”.
Greg Varallo, an attorney for Tesla shareholder Richard Tornetta, who filed the complaint in 2018, said in an email to Reuters that it was a “good day for the good guys.”
The verdict may be appealed to the Delaware Supreme Court.
Tesla shares fell by almost 3% in prolonged New York trading. They have already lost more than 20% of their worth this year.
In addition to being the CEO and a key stakeholder of Tesla, Elon Musk controls the social networking platform X, the rocket company SpaceX, and the brain chip company Neuralink.
After surrendering a major portion of his interest in Tesla to purchase X, Mr Musk now controls approximately 13% of the social media platform, but has recently stated that he wants a larger stake in the electric car manufacturer.
Elon Musk expressed concern about Tesla’s investment in artificial intelligence (AI) technologies.
“I am uncomfortable growing Tesla to be a leader in AI and robotics without having 25% voting control,” he wrote on social media.
He claims that Tesla’s existing ownership structure puts it subject to a “takeover by dubious interests” and that he wants more control over its future.
“Unless that is the case, I would prefer to build products outside of Tesla,” he said.