A Delaware judge threw out Elon Musk’s record-breaking $56 billion Tesla (TSLA.O) pay package on Tuesday, calling the board’s compensation “an unfathomable sum” that was unfair to shareholders. Tesla’s shares fell roughly 2% in premarket trading, and some investors seized on the decision in the hopes that it would force the company to restructure its governance. The board has been criticized for failing to provide oversight of its combative, headline-making CEO, who has fought regulators and led several other companies simultaneously.
The judge discovered that the directors who negotiated the share-based compensation appeared to be subservient to Musk, who is currently Forbes magazine’s richest person in the world. The ruling, which is appealable, nullifies the largest pay package in corporate America. Tesla and Musk reached a 10-year pay agreement in 2018, which would have been worth approximately $51 billion at Tuesday’s closing price for Tesla stock, accounting for the cost to Musk to exercise the options.
