Elon Musk's $55.8 billion Tesla pay package struck down by judge

A Delaware judge struck down Elon Musk's multibillion-dollar pay package at Tesla after finding the process for securing its approval "deeply flawed," a major setback for the chief executive of the world's most valuable automaker.

- Rebecca Elliott

The decision, issued Tuesday in the Delaware Court of Chancery, calls into question how Tesla's board plans to compensate Musk, a serial entrepreneur with an array of other business interests.

It also raises questions about whether his ties to his board are too close, and puts greater attention on Musk's personal wealth. Musk doesn't accept a salary from Tesla, and while in recent years he has ranked as the world's richest person, most of his assets are tied up in shares of his companies.

Tesla, as a publicly traded company, is a financial pillar of his business empire. Musk has also borrowed against his stake in the electric-car maker.

"The process leading to the approval of Musk's compensation plan was deeply flawed," Chancellor Kathaleen McCormick wrote in the opinion, citing Musk's "extensive ties" with board members who negotiated his most recent pay deal, which shareholders approved in 2018. The pay package was valued at a maximum of $55.8 billion, McCormick wrote.

"Musk was the paradigmatic 'Superstar CEO,' who held some of the most influential corporate positions (CEO, Chair, and founder), enjoyed thick ties with the directors tasked with negotiating on behalf of Tesla, and dominated the process that led to board approval of his compensation plan," she wrote. Tesla shares fell more than 2% in after-hours trading Tuesday.

The ruling could mean the electric-vehicle maker will have to draft a new compensation package for the chief executive, throwing into question how Musk, deeply tied to the automaker's early days, should be rewarded.