Elon Musk, the chief executive of Tesla, suffered a stunning rebuke Tuesday when a Delaware judge voided the pay package that helped make him a billionaire many times over and the world’s wealthiest human being.
In a decision that cast a harsh light on the behavior of Mr. Musk and Tesla’s board of directors, Chancellor Kathaleen St. J. McCormick of the Delaware Court of Chancery said the chief executive had effectively overseen his own compensation plan — currently worth about $50 billion — with the help of compliant board members.
“The process leading to the approval of Musk’s compensation plan was deeply flawed,” the judge said. She ordered that the contract that gave Mr. Musk “the largest potential compensation plan in the history of public markets” be voided, and told parties in the case to work out how Mr. Musk would return excess pay.
Some compensation experts said the decision would send a warning to other companies that awarded their top executives very large pay packages.
“It’s an incredibly important decision because it establishes that there is such a thing as excessive compensation,” said Sarah Anderson, global economy project director at the Institute for Policy Studies, a progressive research group.
When it devised the stock options package in 2018, Tesla’s board said Mr. Musk would be paid only if the company produced exceptional results and its stock price soared.