This week, Elon Musk experienced one of the most substantial legal setbacks in U.S. history as the Tesla CEO lost his $56 billion pay package in a case initiated by an unexpected adversary—a former heavy metal drummer named Richard Tornetta. Describing himself as “a marketer, inventor, custom fabricator, car guy, and family man, as well as a drummer,” Tornetta, who held just nine shares of Tesla, filed the lawsuit in 2018. After making its way to trial in late 2022, a judge ruled in favor of Tornetta on Tuesday, deeming the massive pay deal unfair to him and all shareholders and consequently voiding it.
In announcing the ruling, the Delaware Chancery Court panel said that the board of directors failed to exercise its independence in negotiating Musk’s compensation deal. The panel also ruled that the terms of the deal were arbitrary, capricious, and unreasonable.
The decision slashed the value of Tesla’s shares by an amount equivalent to nearly half its current market capitalization. The case has highlighted the role of individual shareholders and the limits on how much power corporate boards can assert when determining their CEO’s pay.
It’s a blow that could profoundly impact Tesla and the technology industry as a whole. The billionaire, who has a reputation for taking risks, is the primary owner of the electric car company Tesla, which he also chairs. He is also the founder of SpaceX, which transports NASA astronauts into space and operates a fleet of private rockets; the Boring Company, which is developing ways to drill tunnels more cheaply; and Neuralink, which has been working toward using brain implants to connect a person’s mind directly to a computer.
Despite the massive setback, it’s still possible for Tesla and its lawyers to appeal the ruling. It’s just another bump in the long road to a judgment that could force Musk out of his chairmanship or at least limit his ability to control his companies as he sees fit.
While Musk’s rise to fame and the magnitude of his influence has been the subject of numerous news articles and books, more must be understood about how he wields his power. His influence is evident in the fact that a single executive can alter or halt the production of a vehicle. Still, it’s also present in the nuances of his political views and foreign policy. He is a public figure with a large following, and his stances on controversial issues often align with his financial interests. For example, he’s reluctant to provide Internet service in Russia because it’s dependent on the goodwill of officials in Beijing. That same logic applies to China’s attempts to assert sovereignty over Taiwan, which Musk has endorsed by floating a peace plan that would give the island joint control with mainland China.
