June 12, 2024

Musk Not The Richest: Court Decides He Can't Keep Tesla Payout

Elon Musk, CEO of Tesla (and whose Neuralink implants became the first brain chip in a human), first rose to the position of the richest man in the world in September 2021 and then again in 2023 and has held the title ever since. But that’s all about to change as this new ruling from a Delaware court comes in.

A judge from Delaware has reportedly sided with the shareholders of Tesla and denied Musk the $56 billion promised to him via corporate payout.

The ruling comes after a lawsuit was filed against him by the shareholders of his company Tesla, which stated that Musk dictated his own terms of payment to the board members and they had no independent say in how much he gets to take home.

…neither the compensation committee nor the board acted in the best interests of the company when negotiating Musk’s compensation plan. In fact, there is barely any evidence of negotiations at all.Judge Kathaleen McCormick

She also went on to say that Elon Musk is a “Superstar CEO” (from what it looks like, that’s sarcasm?) who used his personal connections with some of the board members and power over the company to create a payment approval process that works in his favor and is not subject to the decisions of his board members.

Read more about Elon: Fidelity slashes valuation of Musk’s X holdings by 71.5% amidst advertiser boycott

What Does Elon Musk Have To Say In His Defence? 

Elon Musk isn’t one to keep mum. Taking to his X account, he tweeted “Never incorporate your company in the state of Delaware.”

Further, his lawyers also stated that the massive paycheck that was approved by the board members and the shareholders back in 2018 was solely done to keep the best engineers in the world focused completely on Tesla.

According to the deal he then created, he would receive 1% of the company’s share for each commercial milestone it reaches. Since then, the company sped past all 12 pre-decided milestones which propelled both Tesla and Musk to the top.

Although the growth benefited all shareholders, McCormick pointed out that Musk was already heavily benefitting from the company, considering he owned 22% of its shares.

She also observed that back then (i.e. in 2018), Tesla was in the middle of launching the Model 3 Sedan—a car that would make the luxury brand available to middle-class customers. In her words, this was “the largest potential compensation opportunity ever observed in public markets by multiple orders of magnitude.”

If this ruling is accepted and followed through by Elon Musk, he might slip below Jeff Bezos in the world’s richest list.

She also questioned whether this step was even necessary to retain Musk and grow the company (as stated by Musk’s lawyers) or to simply make the company dependent on him.

Furthermore, Musk isn’t the only one to take a hit from the case. Tesla’s shares slipped by 4% in after-hours trading on Tuesday evening.

After all, both the New York Stock Exchange and the Nasdaq Exchange need the company’s board of directors to be independent of the company before its shares can be traded in the open market.

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