On Tuesday, a Delaware court made a decision that supported the investors who argued that billionaire Elon Musk’s $56 billion Tesla compensation package was too high.
The judge found that Musk’s compensation was inappropriately set by the electric vehicle maker’s board and struck down the package. If the decision survives any potential appeal, the Tesla board will have to come up with a new compensation package for Musk.
“Never incorporate your company in the state of Delaware,” Musk responded on Twitter/X. “I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters,” he added.
I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters
— Elon Musk (@elonmusk) January 31, 2024
The pay package grants stock option awards allowing Musk to buy Tesla stock at heavily discounted prices as escalating financial and operational goals are met. He must hold the acquired stock for five years. Musk qualified for all 12 tranches or performance targets in the plan. He was not guaranteed any salary.
Tesla shareholder Richard Tornetta filed the lawsuit five years ago, accusing the company’s chief executive of improperly dictating negotiations around the compensation package and claimed that the board acted without independence.
The court’s opinion directed Tornetta to work with Musk’s legal team on an order implementing the judge’s decision. The ruling can be appealed to the Delaware Supreme Court.
Musk’s Tesla pay package is the largest compensation deal ever
Tesla’s agreement with Musk is by far the largest compensation deal ever for an executive and it contributes a significant part of his fortune, which is one of the world’s largest. Musk testified during the compensation trial in November 2022 that the money would be used to finance interplanetary travel.
“It’s a way to get humanity to Mars,” he testified. “So Tesla can assist in potentially achieving that.“
Tesla directors argued during a weeklong trial that the company was paying to ensure that one of the world’s most dynamic entrepreneurs continued to dedicate his attention to the electric-vehicle maker. Antonio Gracias, a Tesla director from 2007 to 2021, called the package “a great deal for shareholders” because he said it led to the company’s extraordinary success.
The judge said the defense was unable to establish that the “historically unprecedented compensation plan” was necessary to ensure Musk remained dedicated to Tesla.
“Swept up by the rhetoric of ‘all upside,’ or perhaps starry-eyed by Musk’s superstar appeal, the board never asked the $55.8 billion question: Was the plan even necessary for Tesla to retain Musk and achieve its goals?” Judge Kathaleen St J McCormick wrote in her decision.
In July 2023, Tesla’s directors agreed to return $735m to the company to settle shareholder allegations brought in a separate lawsuit filed in 2020 that they overpaid themselves. The lawsuit challenged options that were granted to directors starting in June 2017.
See all the latest news from Greece and the world at Greekreporter.com. Contact our newsroom to report an update or send your story, photos and videos. Follow GR on Google News and subscribe here to our daily email!
