Elon Musk may move a legal challenge to Texas to restore his $56 billion pay package, a legal analyst has said.
On Monday, Delaware Chancery Court Judge Kathaleen McCormick rejected Musk's attempts to award himself $56 billion in Tesla shares for the past six years he has spent as chief executive of the car company.
The ruling was McCormick's second rejection of the billionaire's pay deal. The judge agreed with shareholders who argued that the share allocation was excessive.
Greg Germain, a corporate law professor at Syracuse University, told Newsweek that even by U.S. corporate standards, Musk's share package was "extraordinary."
Germain also noted that while Tesla was previously registered as a company in Delaware, Musk reincorporated the company in Texas after losing before McCormack's court in January.
He said Musk would likely try to create a new share package for himself that incorporated the old $56 billion deal. Newsweek has contacted Musk's office for comment via email.
"The corporation has now moved to Texas. Musk might try to get a different opinion from the Texas courts, but I doubt they would be successful," he said.
"More likely, Tesla will offer Musk a new pay package that rolls in the old, and if ratified will be determined by the judges in Texas rather than the judges in Delaware, in the hope that the Texas judges will be even more corporate friendly than Delaware's," Germain added.
He said Musk's options included appealing the Delaware decision to a higher court, especially as Musk's share package had been ratified by Tesla's board and by the majority of shareholders.
The ratification occurred after McCormick rejected the $56 billion package in January, as a way for Musk's lawyers to strengthen their legal case.
"There will likely be an appeal, and I suspect that the appellate courts may not agree with the judge's holding that re-ratification cannot overturn a court decision. If I'm right, the outcome may depend on whether the appellate courts agree with the trial court's finding of process and factual deficiencies," Germain said.
He added: "Executive compensation is a very controversial subject, because compensation packages for executives in the U.S. have become astronomical in recent years. Musk's $50 billion in compensation for essentially six years of work is the most extraordinary ever."
Eric Chaffee, a business law professor at Case Western Reserve University in Ohio, agreed that Musk's pay demand was enormous and unprecedented.
"In many instances, a court might have reached a different conclusion, but Musk's compensation was exorbitant," he told Newsweek.
"Superstar executive compensation is legally permissible, but there are limits. Elon Musk's compensation is one example of this," Chaffee added.
Last month, Musk, a close ally of President-elect Donald Trump, was appointed co-lead of the newly created Department of Government Efficiency. He has vowed to cut the federal budget by $2 trillion a year.
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