Elon Musk has responded after a judge ruled that his $56 billion pay package from Tesla was too high and needs to be returned.
Five years ago, Tesla shareholder Richard Tornetta filed a lawsuit against the company and its board of directors, accusing it of improperly dictating negotiations around the staggering $56 billion compensation package, according to The Guardian.
The plaintiff's legal team claimed that the board acted without independence, meanwhile, defense lawyers contended that the package - which was given to Musk in the form of several stock portions - was fairly arranged by a committee of independent directors.
They added that the package was approved by a shareholder vote that was not even needed, per Sky News.
The company's agreement with the billionaire constitutes a substantial part of his fortune.
In November 2022, Musk testified during the trial that the money would be used to fund travel to space, explaining: "It’s a way to get humanity to Mars. So Tesla can assist in potentially achieving that."
In addition to this, Antonio Gracias (Tesla director from 2007 to 2021) described the compensation package as "a great deal for shareholders" because it will lead to the organization's success.
Nevertheless, a Delaware court ruled on Tuesday (January 10) that the electric vehicle maker’s board had set an unacceptable payment for the business mogul.
The judge said the defense was unable to prove that the "historically unprecedented compensation plan" was crucial to ensure Musk stayed devoted to Tesla. She required parties to consult on a final form of order to execute her decision.
"Swept up by the rhetoric of 'all upside,' or perhaps starry-eyed by Musk’s superstar appeal, the board never asked the $55.8 billion question: Was the plan even necessary for Tesla to retain Musk and achieve its goals?" Judge Kathaleen St J McCormick wrote in her decision, as cited by The Guardian.
She added that Musk had "extensive ties" with the "persons tasked with negotiating on Tesla's behalf'" and accused Musk of establishing "a self-driving process, recalibrating the speed and direction along the way as he saw fit".
The Tesla CEO reacted to the ruling on X, the social media platform he owns, by telling his 170 million followers: "Never incorporate your company in the state of Delaware."
He then went on to launch a poll asking if he should change the state of incorporation of Tesla to Texas, where the company's largest physical presence is.
Musk will have the opportunity to appeal the ruling.