Chancellor Kathaleen St. J. McCormick of the Delaware Court of Chancery intends to void the pay package that made Elon Musk the richest person in the world (worth approximately $50 billion), leaving Tesla’s board of directors with crucial decisions to make. The decision orders Tesla to cancel Elon Musk’s stock options, and the board must figure out a new compensation plan that satisfies him. If finalized, Mr. Musk would lose about $50 billion out of shares worth $78 billion. Musk has indicated that he could seek to incorporate the company in a state that is more business-friendly.
Mr. Musk has also threatened to incorporate Tesla in Texas or Nevada. If Mr. Musk does relocate the company, the shareholders would need to vote on the relocation and Mr. Musk would likely see opposition from them. Chancellor McCormick also criticized Mr. Musk’s involvement in the development of the terms of his pay deal, and the lack of independence between him and the board.
The decision is expected to cause changes in Tesla’s approach to vehicle manufacturing and sales if it prompts Mr. Musk to leave or play a less active role in the company. Tesla’s stock fell about 2 percent after Ms. McCormick’s ruling, and Mr. Musk may seek to appeal the decision in the Delaware Supreme Court.