In a court filing on Tuesday, a Delaware judge ruled in favor of investors who contested Elon Musk’s $56 billion pay package from Tesla, stating that it was excessive. The judge concluded that the compensation had been improperly established by Tesla’s board of directors and revoked it. If the decision is upheld in a potential appeal, Tesla’s board would need to create a new compensation plan for Musk.
Elon Musk responded on Twitter/X, saying, “Never incorporate a company in Delaware.”
Five years ago, Tesla shareholder Richard Tornetta filed a lawsuit accusing the company’s CEO, Elon Musk, of improperly directing negotiations on compensation packages and the board of directors lacking independence. The court’s decision directed Tornetta to cooperate with Musk’s legal team regarding the judge’s order, which can be appealed to the Delaware Supreme Court.
Musk’s compensation trial in November 2022 revealed that the money would be used to fund interplanetary travel. He testified, “This is how we’re going to get humans to Mars, so Tesla can help potentially achieve that.”
Tesla’s board argued that the package was necessary to keep Elon Musk committed to the electric car maker. The judge disagreed, noting that the defense failed to prove the need for such an unprecedented compensation plan. She instructed the parties to work on the final order implementing her decision.
The plaintiffs’ legal team also argued that the board had a duty to either reduce Musk’s salary or find another CEO and ensure that he worked full-time at Tesla instead of focusing on other projects.
Amit Batish of executive compensation research firm Equilar estimated in 2022 that Musk’s package was about six times the combined compensation of the 200 highest-paid executives in 2021.
In July, Tesla directors agreed to return $735 million to the company to settle shareholder claims that the company had overpaid in a separate lawsuit.
Source: www.theguardian.com
