A Delaware court ruled against Elon Musk‘s $56 billion Tesla compensation plan on Monday. The lawsuit, filed in June 2018 by shareholder Richard Tornetta, challenged the massive pay package approved by Tesla’s board and shareholders. Chancellor Kathaleen McCormick declared the approval process “deeply flawed.”
The pay package, the largest in corporate history, tied Musk‘s compensation to ambitious performance goals for Tesla. If achieved by 2028, it could have granted Musk over 20% of Tesla stock, currently valued at about $56 billion.
Who is Richard Tornetta?
Richard Tornetta is an interesting person who combines a rebellious rock-and-roll past with a focus on holding corporations accountable. He was the drummer for the heavy metal band Dawn of Correction, known for its loud and intense music, and performed at the famous CBGB club in New York. Outside of music, he builds custom audio gadgets for car lovers and shares fun videos online.
Tornetta became widely known for suing Tesla’s CEO, Elon Musk, in a major shareholder lawsuit. With the help of lawyer Stuart Grant, Tornetta challenged the way Tesla was run. Legal experts, including Eric Talley from Columbia Law School, have called his case a key moment in the history of corporate law.
The court ordered Tesla to propose a new compensation plan for Musk within 90 days. It will also consider awarding damages to Tornetta and other shareholders. Musk subsequently announced Tesla will seek shareholder approval to move its incorporation from Delaware to Texas. This move may face challenges, particularly if seen as protecting Musk’s compensation.
While Musk advocates leaving Delaware, experts warn against the perception that Texas corporate law favors billionaires. Delaware remains a popular incorporation choice for many large companies due to its established legal and tax structures.
Musk expressed disappointment with the ruling, calling it “unfair” and “wrong.” He claimed the package motivated him and his team toward Tesla’s vision and said he would appeal. Following the decision, Musk posted on X (formerly Twitter), advising companies to avoid incorporating in Delaware. He later added, “Change your state of incorporation out of Delaware before they lock the doors.”
