Tesla CEO Elon Musk’s compensation package is under scrutiny after a Delaware judge made the unprecedented decision to throw out a $56 billion payout that Musk received from the company in 2018. This decision could potentially result in Musk having to return a significant part of his salary package.
The judge, Chancellor Kathaleen McCormick, described Musk’s compensation package as the “largest potential compensation opportunity ever seen in the public markets.” The ruling suggested that the compensation package was influenced by Musk’s close ties to the directors who approved it, and that it was deeply flawed and based on conservative performance milestones.
Experts anticipate that the company will be forced to devise a plan to return Musk’s stock options. This decision comes at a challenging time for Musk, as his stake in Tesla has decreased from nearly 22% to around 13% following his $44 billion purchase of Twitter in 2022.
The decision has significant implications for Musk’s net worth, which is around $200 billion. If he is forced to repay the stock grants, his wealth would take a significant hit. However, Musk still owns a significant amount of wealth in the form of Tesla shares and ownership in other companies such as SpaceX and Boring Co.
The situation has put Tesla’s board in a difficult position as they navigate potential future compensation packages for Musk while ensuring a degree of independence from the CEO, whose influence over the company’s compensation process was highlighted in the ruling.
While Musk’s liquidity is reliant on his stock holdings, there are concerns that losing Tesla’s options could put a strain on his ability to cover financial commitments, given that he has used his shares as collateral for loans in the past.
Looking ahead, the board is expected to be chastened by this decision and will likely be cautious about developing new compensation packages for Musk. The situation will be closely watched to see how it unfolds and how it might impact Musk’s control and future compensation from the company.