World's biggest pay package ever: US court denies Elon Musk's $56 billion pay package as Tesla CEO

A Delaware court has rejected the substantial pay package for Elon Musk, CEO of Tesla, which is currently valued at approximately $101 billion. This decision was made despite the approval of the package by Tesla shareholders earlier this year. Originally valued at $56 billion, the pay deal includes 303 million Tesla stock options and became the subject of a legal challenge.

Judge Kathaleen McCormick had previously ruled in January that the compensation plan was unjust to shareholders, citing that Musk and Tesla's board could not demonstrate the package's reasonableness. Attempts by Musk's legal team to overturn this decision after shareholders re-approved the plan in June were unsuccessful, as the court dismissed their appeal.

Unlike traditional compensation structures, Musk does not receive a salary or bonuses from Tesla. Instead, he is awarded stock options that allow him to purchase Tesla shares at prices significantly below market value. This pay arrangement was deemed problematic by the court, particularly since Musk admitted to having negotiated the deal with himself. The judge criticized Tesla's board for accepting Musk's terms without safeguarding shareholder interests.

Tesla's board defended the package by asserting that it was crucial to maintain Musk's focus on managing the company. Musk is also involved in leading multiple other ventures, including SpaceX, Neuralink, the Boring Company, and X (formerly Twitter). Nevertheless, the court concluded that the pay package exceeded boundaries of fairness and reasonableness.

In addition to these developments, Musk has recently engaged in political activities, notably supporting Donald Trump's 2024 presidential campaign with substantial donations. Trump has expressed intentions to appoint Musk as a co-leader of a new government department aimed at reducing federal spending and regulations, contingent on his election victory.

The court's ruling may compel Tesla's board to devise a new compensation structure for Musk. It also underscores broader issues concerning equity in executive compensation and corporate governance.