Judge Tosses Elon Musk's $55 BILLION Pay Package Because WTF $55 BILLION

Oh, your friends said it was cool? FOH.

pile of money on fire

Pour one out for Elon Musk, you guys. America’s most divorced dad is having a very bad day.

Just kidding, FUCK THAT GUY forever. Let us instead join hands in merriment at this delightful decision from the Delaware Court of Chancery tossing out Musk’s $55 billion compensation package.

What’s that? You don’t feel like reading a 200-page legal opinion on your lunch break? Not to fear, Wonkers, we got you.

Begin by casting your mind back to the halcyon shellshocked days of 2017. Sure, we were all in a rage stupor because of Trump. But the tech billionaire we loved to loathe back then was Mark Zuckerberg, whose attention-exploitation machine likely cost us the election en route to launching a dangerous conspiracy cult. At the time, Musk still seemed like a genius, thanks to Tesla’s remarkable rise. How could a man who championed electric cars be not only bad, but also a goddamn bloody idiot?

Spoiler Alert: HE COULD.

But back in 2017, Tesla was renegotiating Musk’s compensation package — or, ummm, “negotiating.” According to a shareholder lawsuit filed the following year, the compensation committee was functionally controlled by Musk, stacked with people who were financially dependent on him and with whom he had long personal relationships. The documents were even drafted by his former divorce attorney Todd Maron, now general counsel at Tesla. And so it is perhaps unsurprising that the committee approved a pay deal which wound up being worth $55 billion over 10 years on the theory that Musk was the indispensable genius, solely responsible for all of Tesla’s growth.

That’s a whole lotta zeroes, as Chancellor Kathaleen McCormick of the Delaware Chancery Court wrote last night:

With a $55.8 billion maximum value and $2.6 billion grant date fair value, the plan is the largest potential compensation opportunity ever observed in public markets by multiple orders of magnitude—250 times larger than the contemporaneous median peer compensation plan and over 33 times larger than the plan’s closest comparison, which was Musk’s prior compensation plan.

In 2018, shareholders sued to have the package rescinded on the theory that stockholders only approved the plan because they were told that the compensation committee was independent and had negotiated in the best interests of the company, not its CEO. And yesterday, the judge agreed, tossing out Musk’s “unfathomable” compensation package as a violation of Delaware’s law of “fairness.”

“[T]he defendants were unable to prove that the stockholder vote was fully informed because the proxy statement inaccurately described key directors as independent and misleadingly omitted details about the process,” she wrote, noting that the committee members’ own testimony described the negotiations as “cooperative.”

“We were not on different sides of things,” admitted committee leader Ira Ehrenpreis, a venture capitalist who built his career on his relationship with Elon Musk and his brother Kimbal. (Kimbal was also on the committee, but appears to have recused himself from the vote.)

The theory was that Tesla had to give Musk anything he wanted, up to and including close to 30 percent of the stock, because otherwise he’d take his bigly brain genius somewhere else and then Tesla wouldn’t be able to build the truck of the future, as long as that future means no snow, ditches, or bugs.

The problem with this theory was that Musk already owned a fifth of the company when the deal was approved; he’d crafted it in his image, crowning himself Tesla’s “Technoking”; he routinely assigned its employees to projects at his other companies without seeking board approval; and he had publicly stated that he intended to be involved in the company for the rest of his life.

At a high level, the “6% for $600 billion” argument has a lot of appeal. But that appeal quickly fades when one remembers that Musk owned 21.9% of Tesla when the board approved his compensation plan. This ownership stake gave him every incentive to push Tesla to levels of transformative growth—Musk stood to gain over $10 billion for every $50 billion in market capitalization increase. Musk had no intention of leaving Tesla, and he made that clear at the outset of the process and throughout this litigation. Moreover, the compensation plan was not conditioned on Musk devoting any set amount of time to Tesla because the board never proposed such a term. 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?

TL, DR? Tesla didn’t need to give Musk another 8 percent of the company in the biggest CEO compensation package in history. The guy wasn’t going to take his talents elsewhere.

Or, to be more accurate, he was going to go elsewhere. He was going to buy Twitter and submerge his brain in the vat of rightwing battery acid until he emerged as a racist caricature, an immigrant who hates immigrants.

In the meantime, Musk is doing what he usually does: whining like a baby on Twitter.

Yes, Delaware, a state that is home to more corporations than human beings, is going to empty out because a lunatic social media junkie can’t get tens of billions of dollars a year to feed his addiction. You betcha.

Tesla stock is up this morning on news of the order, recovering some of the ground it lost last week after a shitshow earnings call where Musk and his minions failed to allay investors’ worries. And at about $191, it’s far off the $293 it reached in August of 2023. Maybe Musk isn’t quite the genius he used to be.

“In the final analysis, Musk launched a self-driving process, recalibrating the speed and direction along the way as he saw fit. The process arrived at an unfair price,” Chancellor McCormick wrote. “In these circumstances, the preferred remedy is the best one. The plaintiff is entitled to rescission.”

I forgot some of you don’t speak lawyer: She means cancel it all, do not pass go.

You love to see it.

Liz Dye lives in Baltimore where she produces the Law and Chaos substack and podcast.