A Delaware judge ruled Tuesday that Tesla CEO Elon Musk must give up a 2018 bonus agreement that could be worth up to $55.8 billion, determining it was not negotiated fairly.
A group of Tesla shareholders sued Musk and the company after it announced the bonus package, which grants Musk a 1 percent stake in the company for each of 12 stock price and revenue milestones laid out in the agreement.
The bonuses could see his control over the company rise from 21 percent to 28 percent, if all the milestones were met, which they eventually were.
The shareholders claimed the bonus’s massive size was because Musk effectively controlled the board, which granted it to him. Defendants described the deal as “high risk, high reward.”
The bonus grant was the largest ever in the history of U.S. private business, Chancery Judge Kathaleen McCormick wrote, more than 250 times larger than the median executive compensation at the time.
McCormick described Musk’s “enormous influence” over the company’s board of directors and his position as a “Superstar CEO.” She added that a shareholder vote to approve the bonus was also unreliable, because the company misinformed shareholders.
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The judge called the process of constructing the bonus agreement “deeply flawed” due to extensive close ties with multiple members of the board that crafted it, adding that the process also landed at an “unfair price.”
She determined that the bonus agreement should be rescinded.
Business analysts have speculated that the ruling could mean that Musk loses his title as the richest man in the world; his net worth was previously estimated by Forbes to be about $210 billion.
Tesla stock was down about 5 percent after hours of coverage of the decision. The ruling adds to trouble at the company sparked by concerns over vehicle safety, specifically its self-driving software.
Just after the ruling was published Tuesday, Musk chastised the court on X, the social media platform he owns that was formerly known as Twitter.
“Never incorporate your company in the state of Delaware,” he said.