Judge rejects Elon Musk's $56 billion pay package from Tesla

A Delaware judge invalidated Tesla CEO Elon Musk's $56 billion salary package, stating the board failed to prove fairness in the compensation plan.

Elon Musk, the CEO of Tesla, received a $56 billion salary package on Tuesday, but a Delaware judge invalidated it, finding that the board of directors of the firm had not demonstrated “that the compensation plan was fair.”

Following news of the ruling in Richard Tornetta, an electric automobile shareholder, the Delaware Chancery Court lawsuit, Tesla's share price fell almost 3% in after-hours trading on Tuesday. The judge stated that Tesla's 2018 pay package was the biggest in the company's history. This made Musk, the CEO of SpaceX and Tesla, the richest person on the globe and a centibillionaire.

Musk was given the opportunity to purchase 12 tranches of Tesla stock options under the terms of the plan. These options would vest if Tesla met a revenue objective and its market capitalization climbed by $50 billion.

According to Chancery Court Judge Kathaleen McCormick’s ruling, Tornetta had demonstrated that Musk "controlled Tesla," and the procedure by which the board had approved his salary was "deeply flawed."

McCormick stated that the basis for her decision was the conclusion that Musk, not the company's shareholders or board of directors, was in charge of Tesla — at least when it came to deciding how much he would be paid.

The court determined that because the proxy statement misrepresented important directors as independent and falsely omitted information about the procedure, Tesla and Musk's lawyers could not establish that the stockholder vote was fully informed.