Tesla shares fell 3% after a Delaware judge found Elon Musk’s $56 billion pay plan unjust to stakeholders. The Tesla board has been attacked for failing to oversee the CEO, who has fought authorities and managed many firms. The verdict nullifies the highest corporate pay package since Musk-reliant directors negotiated the share-based compensation.
A Delaware judge has ruled that Elon Musk’s record-breaking $56 billion Tesla pay package is unfair to stakeholders. This has led to a drop in Tesla shares by around 3% in extended trade The Tesla board has been attacked for failing to oversee the CEO, who has fought authorities and managed multiple firms. The court invalidates the highest corporate pay package because directors who appeared beholden to Musk, Forbes’ richest person, structured the share-based salary.
Kathaleen McCormick of Delaware’s Court of Chancery noted that the board never asked the $55.8 billion question: Was the plan required to keep Musk and achieve its goals? McCormick ordered the Tesla shareholder who challenged the pay plan to work with Musk’s legal team to implement the ruling. After agreeing on a final ruling and Tesla paying the shareholder’s attorneys, it can be appealed to the Delaware Supreme Court.
Tesla warns of slowing growth and the electric vehicle industry is reassessing demand. Musk has made Tesla the world’s most valuable automaker, but much of that wealth is reliant on future advances like self-driving robotaxis. Musk testified during the week-long November 2022 compensation trial that the money will fund interplanetary travel. At Tuesday’s Tesla stock closing price, Musk’s 2018 10-year salary agreement with Tesla would be worth $51 billion, including the cost of exercising the options. Forbes magazine estimates that that would be 25% of his $210.6 billion fortune, $2 billion ahead of LVMH LVMH.PA CEO Bernard Arnault of France and his family.
Tesla directors claimed throughout the trial that the business paid one of the world’s most dynamic entrepreneurs to be focused on the electric vehicle maker. Tesla director from 2007 to 2021 Antonio Gracias hailed the package “a great deal for shareholders.” Tornetta’s lawyers said the Tesla board never informed shareholders that targets were simpler than the company was admitting and that internal predictions suggested Musk would soon qualify for significant compensation packages.
The plaintiff’s lawyers also said the board should have offered Musk a lower salary contract or found a new CEO and compelled him to work full-time at Tesla instead of SpaceX and X. Tesla investor Nia Impact Capital founder Kristin Hull claimed the board is bound to Musk, a concern at other big tech companies.
Conclusion
Tesla shares fell 3% after a Delaware judge found Elon Musk’s $56 billion pay plan unjust to shareholders. The Tesla board has been attacked for failing to oversee the CEO, who has fought authorities and managed many firms. The verdict nullifies the highest corporate pay package since Musk-reliant directors negotiated the share-based compensation. At Tuesday’s Tesla stock closing price, Musk’s 2018 10-year salary agreement with Tesla would be worth $51 billion, including the cost of exercising the options. The plaintiff’s lawyers suggested the board should have offered Musk a lower salary contract or find a new CEO and ordered him to work full-time at Tesla instead of letting him work on side projects.
