Elon Musk
Elon MuskReuters

Delaware judge Kathaleen Saint Jude McCormick has ruled that Elon musk's $56B dollar compensation package from Tesla is excessive, and ruled that the board of directors of the company must establish a new and more modest agreement.

Shareholder Richard Tornetta filed the appeal five years ago, claiming that the compensation package was intended to keep Musk dedicated to Tesla and does not meet high enough standards.

During the deliberations, Musk claimed in 2022 that the money would go to fund interstellar flight and bring mankind to Mars. The judge wrote in a 29-page verdict that the company had been “swept away by Musk's rhetoric and superstar appeal."

The judge further ruled that the board of directors had not properly ascertained that the compensation package was necessary for Tesla to retain Musk's efforts on behalf of the company and achieve corporate goals.

According to the verdict, the burden of proof that the compensation package was reasonable fell on Musk and the Tesla board of directors, who did not sufficiently demonstrate as much to the judge.

Tornetta’s legal team claimed that the board of directors needed to provide a more modest pay package or find a new director, and should have demanded that Musk work exclusively at Tesla instead of allowing him to advance other projects. The board will now need to decide whether to give Musk a smaller pay package as a bonus, or find a new director for Tesla.

Musk later wrote on X: "Never incorporate your company in the state of Delaware."