The ruling that could cost Elon Musk his title as the world’s richest person | Tech News
Elon Musk could be set to lose a huge chunk of his fortune after a Delaware judge voided the $56 billion pay package he awarded himself as head of Tesla.
The judge sided with investors and claimed Musk’s record-setting compensation plan was excessive, and struck down the package.
If the ruling survives a potential appeal, Tesla will be tasked with designing a new compensation package for Musk.
Musk currently enjoys a net worth of around $205 billion, and spent most of 2023 as the richest man in the world.
But should the verdict go through, Musk will see his net worth slashed to ‘only’ $154 billion, knocking him several notches down the list of the world’s richest people.
Amazon’s Jeff Bezos is currently the second-richest person in the world, with a net worth of $186 billion. Following him is Bernard Arnault, the French CEO of luxury goods company LVMH, who’s estimated to be worth $164billion.
Bill Gates and Mark Zuckerberg take the 4th and 5th spots with a net worth of $143 and $142 billion respectively, Bloomberg reports.
He does not receive a salary for his role as CEO of Tesla, and is instead paid in stock options centred around the car manufacturers financial growth. The package is one of Musk’s most high-value assets, and forms a significant part of his wealth.
‘Never incorporate your company in the state of Delaware,’ Musk tweeted following the ruling.
When the compensation plan was put in place in 2018, Tesla argued that the sky-high pay was necessary to maintain Musk’s focus on the car company.
But the billionaire soon found himself sued by shareholder Richard Tornetta, who said the compensation package was ‘beyond the bounds of reasonable judgement’ and accused Musk of having undue influence over the deal.
During the compensation trial, Musk argued that the pay package, one of the largest of its kind, would be used to finance interplanetary travel.
He told the court ‘It’s a way to get humanity to Mars, so Tesla can assist in potentially achieving that.’
However, the judge claimed Musk’s defence was unable to establish that the ‘historically unprecedented compensation plan’ was necessary to ensure Musk remained dedicated to Tesla and voided the deal.
Giving her verdict, Judge Kathaleen St J McCormick said: ‘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?’
It’s unclear how the ruling will be implemented, and Tesla is still able to appeal the ruling.
In 2022, Amit Batish of Equilar, a research firm specialising in executive compensation, estimated that Musk’s compensation package was approximately six times greater than the collective pay of the 200 highest-earning executives from the previous year.
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