Elon Musk won't be able to keep a Tesla pay package worth more than $55 billion, a Delaware judge ruled Tuesday, saying the Tesla CEO and his company failed to prove the massive payout was fair.
The ruling comes five years after a shareholder lawsuit accused Musk and Tesla's board of directors of failing in their duties to the electric vehicle maker, wasting corporate assets and unjustly enriching the billionaire.
Tesla shares fell 4% in after-hours trading.
musk hadin November that he did not attend any meeting where Tesla's board of directors or its compensation committee discussed the plan, and he denied having a role in setting the payment terms. But Chancery Court Judge Kathaleen McCormick wrote in her ruling that Musk and her attorneys failed to show that the compensation plan was fair.
“(T)he defendants bore the burden of proving that the compensation plan was fair and failed to meet their burden,” McCormick wrote in the decision, which was published online by Bloomberg News.
He added that Musk, Tesla and their lawyers also failed to show that the milestones Musk had to meet to receive the pay package were difficult to meet, and said other parts of his defense failed to make their case.
“Defendants contended that the plan is an exceptional arrangement compared to private equity compensation plans, but did not explain why anyone would compare a public company's compensation plan to a private equity compensation plan,” he added. “The defendants insisted that the plan worked because it delivered to shareholders everything promised, but they made no effort to prove causation.”
After the judge released his ruling, Musk wrote on X, formerly known as Twitter: “Never incorporate your company in the state of Delaware.”
—With information from the Associated Press.
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