• A court in Delaware has said that Tesla can’t grant Elon Musk a pay package amounting to $55 billion.
• This is because shareholders weren’t properly informed about the matter before voting on Musk’s compensation.
• Judge Kathaleen McCormick slammed the decision while highlighting how Tesla’s board of directors is stacked in Musk’s favour.

Despite its relatively small size and population, the US state of Delaware is where many big corporations are incorporated. The laws in this state make it particularly attractive for business owners including companies owned by Elon Musk.

However, despite incorporating Tesla in the state, Musk has now gone on a rant about Delaware. Why? The reasoning is unclear but the fact that a court in the state denied approval of Musk’s $55 billion compensation package from Tesla moments before he started polling users about incorporating Tesla in Texas instead, may be the reason.

The billionaire was set to get a $55 billion pay package but an investor took issue with this claiming that Musk had drawn up the plan himself and crafted a board that would say yes to anything he put on the table.

In the end, Judge Kathaleen McCormick sided with the plaintiffs as reported by The Verge.

The judge said that Tesla’s directors had failed to fully inform shareholders about the matter before voting on Musk’s compensation package. Proxy statements reportedly inaccurately described directors as independent and details were omitted to mislead those voting on the package.

This meant Tesla had to prove that $55 billion was a fair compensation package and it failed to do so.

“If any set of attorneys could have achieved victory in these unlikely circumstances, it was the talented defense attorneys here. But the task proved too tall an order,” McCormick wrote.

Throughout the 201-page ruling, McCormick highlights the failings of the compensation vote and the board of directors. The judge paints those individuals as kowtowing to Musk as opposed to negotiating and challenging what may have been the compensation package anybody has seen publically declared.

All but two of Tesla’s board of directors have direct ties to Musk.

Antonio Gracias, a member of the compensation committee has invested in Musk’s companies since his first venture was purchased by PayPal. James Murdoch is close friends with Musk, Kimbal Musk is his brother. Ira Ehrenpreis, another member of the compensation committee said to the court that his relationship with the Musk brothers had an impact on his career.

Brad Buss reportedly owed 44 percent of his net worth to firms Musk was involved in and finally Robyn Denholm’s compensation as a Tesla board member was higher than any other source. The board of directors then, was stacked in Musk’s favour.

Musk won’t be getting his $55 billion compensation package then and he’s none to pleased with that decision.

“Never incorporate your company in the state of Delaware,” Musk said on the website he’s fashioned into X. “I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters.”

Ironically, it was a shareholder who brought this case against him but, who are we to get in the way of a good narrative built by a billionaire who simply wants to add more billions to his net worth?

The man was so touched by this decision that he is toying with the idea of moving Tesla’s state of incorporation to Texas, where the firm is headquartered.

Whether Musk will move the company is unclear but for now, the board has to rework his compensation package and present something else.