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A Delaware judge has rejected Tesla’s attempt to recover Elon Musk’s record $56 billion in compensation, which he had previously dropped for breach of fiduciary duty on the electric car maker’s board of directors. hit the richest person in the world.
Judge Catherine McCormick said Tesla’s unprecedented effort to push through with a second 2018 pay change four months after first reversing it was “creative.” However, the commission had “no procedural basis to overturn the outcome of the adverse post-trial decision based on the evidence developed after the trial,” she wrote.
The Delaware Court of Chancery’s decision, which is expected to be appealed to the Delaware Supreme Court, will rule out Tesla shareholders’ decision to approve Tesla at a time when Musk is at the height of his social and political power. determines how much weight it has.
Musk has been heard by incoming US President Donald Trump after spending more than $100 million on his re-election campaign. In return, Musk gained influence over key Cabinet appointments and co-chaired an advisory body that vowed to slash the federal budget.
The compensation package of more than 300 million Tesla shares vests only if the company meets a series of challenging stock price and operating goals. In her initial ruling in February, McCormick said that Tesla’s board, which approved the package six years ago, was too cozy with Musk and that her analysis of compensation incentives met a reasonable standard. He said that this shows that it cannot be justified on the basis of the
Tesla stock has soared 44% this year, much of it following President Trump’s Nov. 5 election victory. That means the value of stock options in Musk’s pay package has soared to $108 billion. If ultimately approved, the package would increase his ownership stake from just under 13% to more than 20%.
After Mr. McCormick first overrode Mr. Musk’s pay package, Tesla imposed identical conditions on a shareholder vote in June, with increased disclosure. It passed with 72% support. Shareholders also approved another plan to reincorporate the company from Delaware, where most of America’s largest public companies are listed, to Texas, where several other companies controlled by Mr. Musk are based. did.
Since the February ruling, Musk has complained loudly to Delaware’s corporate law court and moved all company formations to Nevada or Texas. Delaware’s status as a major destination for public company home has been a lingering issue for the state ever since.
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Last month, Musk wrote on his social media platform We should take action,” he posted.
Lawyers for the shareholders who filed the original lawsuit were also paid $345 million in fees in lieu of the $5.6 billion in Tesla stock they had requested, according to Monday’s ruling.
Lawyers from the Bernstein Litowitz firm that represented the Tesla shareholders who filed the lawsuit said they owe $5.6 billion in stock, based on the $56 billion value of the canceled stock grants. However, Mr McCormick refused. He pointed to accounting fees incurred in 2018 and estimated that the value returned to shareholders would be close to $2.3 billion, with a lower limit of $345 million paid in cash or Tesla stock sufficient. said.
