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Cardano creator Charles Hoskinson revealed an interesting fact: Elon Musk had an agreement with Tesla's board and shareholders; if he increased Tesla's value to a trillion dollars, he would receive a 5% commission. This deal was approved by 80% of the shareholders and the board.
Musk joined a select group of CEOs whose businesses have been valued at a trillion dollars, also known as the "trillion dollar club." But subsequently, a Delaware judge declared the compensation agreement void and gave $5 billion to the attorneys who brought the lawsuit contesting it.
Cardano founder Charles Hoskinson made people aware of this development. Discussions concerning legal justice and corporate governance have been sparked by this circumstance. Musk's performance-based compensation plan seemed clear-cut, so what caused this unexpected development?
Just to be clear, Musk had a deal with the shareholders and Tesla board that if he grew the value of Tesla to a trillion dollars, he would get a 5 percent commission on it otherwise nothing. The board and 80 percent of the shareholders approved the deal.
— Charles Hoskinson (@IOHK_Charles) June 8, 2024
Musk then did this being…
The judge's decision to declare it invalid nevertheless called into question the validity of Delaware corporate agreements, however, it makes perfect sense in the context of state's policies. The lawsuit contended that even with board and shareholder approval, Musk's compensation was unreasonable and not in Tesla's best interest. Maybe not if Tesla had been headquartered in a different state.
Delaware is well known for both its complicated legal system and its business-friendly legislation. States that might provide more stable and advantageous conditions for corporations are those like Wyoming, which Hoskinson addressed. Wyoming has made a point of portraying itself as a state that welcomes business and has laws that are favorable to corporate operations.
One way or another, Elon Musk remains if not the wealthiest person on earth, certainly one of the richest. However, keep in mind that valuation of one's company does not equal to the actual liquid value of an entity or an asset.