- A judge just invalidated Elon Musk’s $55 billion Tesla compensation package.
- The ruling, which Tesla can appeal, threatens Musk’s status as the world’s richest man.
- The compensation plan accounts for the bulk of Musk’s wealth, according to Bloomberg.
Elon Musk’s fortune faces a potential financial hit after a Delaware judge on Tuesday struck down the billionaire’s $55 billion Tesla compensation proposal, invalidating a record executive compensation plan are doing.
of decision This means Musk’s net worth (estimated at about $205 billion as of January 31) could take a significant hit. The salary package was worth about $51.1 billion as of Tuesday’s close, making it one of Musk’s most expensive assets. According to Bloomberg.
According to a report by Bloomberg, without the $51.1 billion compensation plan, Musk’s net worth would drop to about $154 billion, dropping him several notches on the current list of the world’s richest people.
Bloomberg Billionaires Index On Tuesday, it did not immediately remove those options from Musk’s estimated net worth.
Musk spent most of 2023 as the world’s richest person. Amazon’s Jeff Bezos is currently the second richest person in the world with a net worth of $186 billion. He is followed by Bernard Arnault, the French chief executive of luxury goods company LVMH, who is estimated to be worth $183 billion. Bloomberg Billionaire Index.
Mr. Musk does not receive a salary from Tesla. His pay package is centered around 304 million stock options in 12 tranches tied to a series of goalposts related to the automaker’s financial growth, BI previously reported. When the compensation plan was introduced in 2018, Tesla claimed The exorbitant compensation was necessary for Mr. Musk to remain focused on Tesla, he said. According to Bloomberg, the option was not exercised by Musk.
Tesla shareholder Richard Tornetta sued Tesla and Musk shortly after the pay plan was introduced, arguing that it was “beyond the bounds of reasonable judgment” and that Musk had no right to the decision. accused of having undue influence over the country.
Tuesday’s ruling came more than a year after a Delaware judge heard the case.
said Tornetta’s attorney, Greg Ballaro. new york times The shares will be canceled.
It is unclear how this sentence will be enforced. Tesla can also appeal the ruling.
Musk, his lawyer, and a Tesla spokesperson did not immediately respond to BI’s requests for comment.
However, Musk alluded to this decision in his next post. Xwrites, “Never incorporate a company in Delaware.”
Two employment lawyers told BI that Tesla and Musk have several options for how to proceed.
Angela Reddock Wright, a Los Angeles-based employment lawyer and mediator, said the board could go back to the table and negotiate a payment plan that everyone is happy with, and perhaps hire a mediator to make that happen. He said there is a possibility of hiring.
“If you’re looking at the greater good of the company, you’d want to resolve it through out-of-court litigation or further litigation,” she said, adding that this would be the most typical route. Prolonging the litigation, she said, could have a negative impact on Tesla’s stock price.
If no agreement is reached out of court, Tesla will likely appeal, but Musk may be interested in filing an appeal immediately.
“He may pursue this out of principle and perhaps just to try to prove that the compensation offer is fair, from his perspective,” she said. “He’s a guy who likes to prove his points.”
Cynthia Augello, a New York-based employment lawyer, also said the parties could try to negotiate comprehensively before filing a formal appeal. If he were to appeal, Musk could argue that his compensation package was justified, citing Tesla’s rising valuation, regardless of the board’s neutrality, he said. .
Joshua Tyler White, a former financial economist at the SEC and assistant professor of finance at Vanderbilt University, also said that while Tesla would likely appeal, a new pay structure would be a top priority for the company.
“They need to come up with a new package quickly because they will lose interest in Mr. Musk’s company,” he told BI. “They’ve already seen his interests shift to other businesses, and they can’t risk losing any more of his interest, especially when Tesla is at a crossroads in terms of competing with China. I can’t go there.”