The Delaware Chancery Court ruled on Tuesday that a nearly $56 billion compensation package awarded to Tesla CEO Elon Musk in 2018 was invalid. The decision was made by Chancellor Kathaleen St. Jude McCormick, the same judge who forced Musk to go through with his $44 billion purchase of Twitter in 2022 after he tried to back out.
That’s an even $100 billion that Musk has lost to the rulings of this single judge. Combined, this would be the single greatest loss of personal wealth in human history, except that someone topped it in 2023. And that someone … was also Elon Musk.
The decision voiding his 2018 pay package comes just two weeks after Musk tried to extort another $80 billion from Tesla’s board while threatening to do his geniusing elsewhere. It seems like a pretty safe bet that’s not going to happen.
At one point in 2021, with Tesla stock riding high and Musk fueling his dreams by casually carving off billion-dollar chunks, the guy who did not found Tesla was worth an unfathomable $320 billion. But while Musk topped Investopedia’s list of the wealthiest people in the world until this week, he may be heading several rungs down the ladder.
The losses in 2023 took Musk’s wealth down from multiples of his nearest rival to the point where he had already moved into second place on the Forbes Magazine list. Subtracting the pay package voided on Tuesday would likely drop Musk to around the 10th position. What’s even more fun: If the total of his losses from Twitter and the most recent judgment were handed to one person, that hypothetical person would be No. 14 on the Forbes list.
Following Tuesday’s ruling, Musk tweeted, “Never incorporate your company in the state of Delaware.” But the truth is that Delaware’s rules are notoriously corporation-friendly, giving companies enormous tax breaks and a great deal of both privacy and flexibility. That’s why over 60% of Fortune 500 companies, no matter where their physical headquarters are located, are incorporated in Delaware.
In short, getting smacked down by the state’s Chancery Court for an internal business dealing means you really screwed up.
The idea of reading a 200-page legal ruling focusing on executive compensation may sound like a torture devised in one of Dante’s lowest bolgia, but honestly, this text is delightful. Chancellor McCormick has written her ruling more like a work of literature than what you might expect in most courtrooms. It even has a grand opening:
Was the richest person in the world overpaid? The stockholder plaintiff in this derivative lawsuit says so. … With a $55.8 billion maximum value and $2.6 billion grant date fair value, the plan is the largest potential compensation opportunity ever observed in public markets by multiple orders of magnitude—250 times larger than the contemporaneous median peer compensation plan and over 33 times larger than the plan’s closest comparison, which was Musk’s prior compensation plan.
That last part is just astounding. Jaw-dropping. Infuriating. What executive couldn’t be super wealthy if they supersized their compensation package times 250? And Musk was already the holder of the biggest compensation package on record. These numbers make it very clear why this lawsuit was filed in the first place.
If reading through the whole ruling seems like a bit much, CNBC has pulled out some of the most amusing highlights. For example:
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In response to testimony from Musk’s brother that “Tesla created Elon Musk’s persona and Elon Musk’s persona is attached to Tesla,” McCormick dropped a “Frankenstein” reference. “Tesla and Musk are intertwined, almost in a Mary Shelley (‘You are my creator . . .’) sort of way,” wrote McCormick.
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A lengthy section is devoted to explaining why Musk’s belief that he has “a moral obligation” to colonize Mars is not a factor in determining fair compensation from a car company.
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Having already launched into outer space, McCormick followed up with a nod to “Star Trek,” writing that “This decision dares to ‘boldly go where no man has gone before,’ or at least where no Delaware court has tread.”
There’s also a Shakespeare quote in there, along with some uncomplimentary mentions of Musk’s obsession with self-driving cars. But the most important part of the ruling is McCormick’s determination that the Tesla board, which awarded the massive compensation package to Musk, was nothing more than a proxy.
“In addition to his 21.9% equity stake, Musk was the paradigmatic ‘Superstar CEO,’ who held some of the most influential corporate positions (CEO, Chair, and founder), enjoyed thick ties with the directors tasked with negotiating on behalf of Tesla, and dominated the process that led to board approval of his compensation plan. At least as to this transaction, Musk controlled Tesla.
Musk defined all the goals he had to meet to receive bonuses, he set the timing, and he dictated the terms. In other words, when it came to determining his paycheck, Musk was running Tesla, not the board—and certainly not the shareholders. He gave the money to himself.
That’s why he now has to give it back.
No one should cry for Musk. He still has more wealth than any human being should ever hold.
For now.
It is primary season, and Donald Trump seems pretty low energy these days. Kerry and Markos talk about the chances of Trump stumbling through the election season and the need to press our advantage and make gains in the House and Senate. Meanwhile, the right-wing media world is losing its collective minds about Taylor Swift registering younger Americans to vote!
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