NAIROBI, Kenya- Elon Musk may be the richest person in the world, but his record-setting $56 billion Tesla pay package just hit another brick wall.
A Delaware court has ruled, once again, to deny the eye-popping award, citing conflicts of interest within Tesla’s board.
Despite shareholder approval, the court’s decision underscores the complexities of corporate governance and raises questions about how far influence should stretch in the boardroom.
In the latest decision, the court stated that Tesla’s board was too heavily influenced by Musk when approving his 2018 pay package. The compensation, which would have been the largest for any CEO of a public company, was deemed unfair.
While Tesla’s shareholders overwhelmingly approved the deal with a 75pc vote, Judge McCormick found their input insufficient to ratify what she called an “unreasonable” arrangement.
In her opinion, she criticized Tesla’s legal team for their “creative” defense but ultimately concluded that the package violated principles of fairness.
Musk, never one to shy away from a public fight, responded on X (formerly Twitter): “[S]hareholders should control company votes, not judges.” Tesla has vowed to appeal, arguing that the ruling undermines shareholder rights.
Observers say this decision reaffirms Delaware’s conflict-of-interest rules, which are crucial in protecting investors.
Charles Elson, a corporate governance expert at the University of Delaware, praised the ruling, describing Tesla’s pay process as “a combo” of poor independence, CEO dominance, and disproportionate compensation.
Had the court sided with Musk, it could have weakened safeguards designed to shield all investors—not just minority ones—from potential boardroom overreach. Elson emphasized the broader implications: “The idea of conflict rules is to protect all investors.”
Interestingly, Tesla recently shifted its legal base to Texas, which raises the possibility of the company revisiting a similar pay arrangement under a different jurisdiction.
The case also awarded $345 million in legal fees to the shareholder who initially brought the case against Tesla and Musk. However, their request for $5.6 billion in Tesla shares was denied, adding another layer of complexity to the ruling.
As this legal battle continues to unfold, it highlights the tension between corporate ambition and regulatory oversight. Whether Tesla’s next move involves an appeal or a fresh attempt at a Texas-sized pay package, one thing is clear: this saga is far from over.
