The $55.8B Fairness Question on Musk's Compensation Plan.

Boardroom Governance Newsletter #49 | Feb 7, 2024.

“Was the richest person in the world overpaid?”

“With a $55.8 billion maximum value and $2.6 billion grant date fair value, the plan is the largest potential compensation opportunity ever observed in public markets by multiple orders of magnitude—250 times larger than the contemporaneous median peer compensation plan and over 33 times larger than the plan’s closest comparison, which was Musk’s prior compensation plan.”

“A board of director’s decision on how much to pay a company’s CEO is the quintessential business determination subject to great judicial deference. But Delaware law recognizes unique risks inherent in a corporation’s transactions with its controlling stockholder. Given those risks, under Delaware law, the presumptive standard of review for conflicted-controller transactions is entire fairness.”

Last week, Delaware Chancellor Kathaleen McCormick issued a 201-page opinion in Tornetta v Musk, where she rescinded the $55.8 billion compensation plan awarded to Elon Musk.

Let …