Elon Musk can't keep $55 billion Tesla pay package, Delaware judge rules
Elon Musk may not keep a Tesla pay package worth more than $55 billion, a Delaware judge ruled on Tuesday, saying that the Tesla CEO and his company failed to prove that the massive payout was fair.
The ruling comes five years after a shareholder lawsuit accused Musk and Tesla's board of directors of breaching their duties to the electric vehicle manufacturer, wasting corporate assets and unjustly enriching the billionaire.
Tesla shares slid 4% in after-hours trading.
Musk had testified in November that he didn't attend any meetings where the plan was discussed by Tesla's board or its compensation committee, and denied that he had a hand in setting the terms of the payout. But Chancery Court Judge Kathaleen McCormick wrote in her ruling that Musk and his attorneys failed to prove that the compensation plan was fair.
"[T]he defendants bore the burden of proving that the compensation plan was fair, and they failed to meet their burden," McCormick wrote in the decision, which was posted online by Bloomberg News.
She added that Musk, Tesla and their attorneys also failed to prove that the milestones that Musk had to meet to receive the pay package were difficult to reach, and said that other parts of their defense failed to make their case.
"The defendants maintained that the plan is an exceptional deal when compared to private equity compensation plans, but they did not explain why anyone would compare a public company's compensation plan with a private equity compensation plan," she added. "The defendants insisted that the plan worked in that it delivered to stockholders all that was promised, but they made no effort to prove causation."
After the judge released her ruling, Musk wrote on X, formerly known as Twitter, "Never incorporate your company in the state of Delaware."
—With reporting by the Associated Press.
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Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
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