A court in the US state of Delaware has voided a multi-billion dollar pay deal that was awarded to Elon Musk in 2018 by Tesla.
The financial compensation package, consisting of $55.8 billion, was dubbed "an unfathomable sum" by Chancery Court Chief Judge Kathaleen McCormick.
The lawsuit, which has been ongoing for years, was filed by a shareholder of Tesla who claimed that Musk, the Founder of X Corp and the CEO of Tesla Motors, was being overpaid.
The shareholder, Richard Tornetta, launched the legal action with the intention of getting the financial award rescinded.
Directors of Tesla argued that the huge pay-out set out to keep Musk, one of the world's most successful and dynamic entrepreneurs, focussed on the electronic car company.
Judge McCormick continued to accuse Tesla Directors of being "swept up by the rhetoric" that surrounds Musk's "superstar appeal".
One of the main reasons that the deal was cancelled, was due to Musk having "extensive ties" to the officials who were tasked with negotiating the Tesla CEO's financial award – said Judge McCormick.
The pay deal, which was struck six years ago, marks the largest ever pay-out in US corporate history and supports Musk as the richest man in the world.
After cancelling the compensation contract, Judge McCormick said that the process leading to the financial package being approved was "deeply flawed" and the amount of money was not fair to shareholders.
Musk's estimated net worth was measured between $198 billion and $220 billion in November last year, according to Bloomberg and Forbes.
Greg Varallo, a Lawyer representing the Tesla shareholder, called the outcome a "good day for the good guys" in an email reported by the Reuters news agency.
After the multi-billion-dollar pay-out was annulled by the Delaware Supreme Court, the Tesla CEO took to X, formerly Twitter, to share his frustration.
On his social media page, Musk, who does not receive a salary from Tesla, advised his followers to "never incorporate your company in the state of Delaware".
"I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters," the billionaire continued in another post.
The Founder of X Corp later launched a poll on X.com, a domain that Musk recently bought back, to discuss whether Tesla should change its state of incorporation.
Musk's poll asked: "Should Tesla change its state of incorporation to Texas, home of its physical headquarters?"
Since it was posted 10 hours ago, Musk's poll has received more than 740,000 votes. A staggering 88 per cent of the voters said that Tesla should change its state of incorporation to Texas.
Should Tesla change its state of incorporation to Texas, home of its physical headquarters?
— Elon Musk (@elonmusk) January 31, 2024
While Judge McCormick cancelled the financial contract, reports note that the Tesla shareholder who claimed the 2018 package was unfair, failed to tell the court what Musk could do to be worthy of the mass compensation.
After being the richest man in the world for the past two years, according to inside sources, Musk has told analysts that he wants to expand his stake in Tesla Motors to avoid being ousted.
While appearing at the Delaware Supreme Court, there were multiple conflicts of interest when lawmakers approved the decision to retain Musk as Tesla's chief executive officer.
Sources also say that Musk is looking to expand his Tesla investment to maintain control and leadership of the company, in addition to expanding further into new technologies and artificial intelligence.
In a social media post, Musk said: "I am uncomfortable growing Tesla to be a leader in AI and robotics without having 25 per cent voting control."
The CEO of the electric car company went on to note that the current shareholder structure within Tesla, makes the brand vulnerable to a "takeover by dubious interests".
