Judge voids Musk’s ‘unfair’ $56 billion Tesla pay package
A Delaware judge nullified Elon Musk’s record-breaking Tesla pay package on Tuesday, calling the CEO’s $56 billion compensation unfathomable. The judge concluded that the board who granted it failed to act in the best interest of shareholders. The court of chanceries Kathleen McCormack said the pay plan was negotiated by directors who had extensive ties with Musk, making them beholden to him.
Flaws in the Pay Package Decision
The judge observed flaws in the decision to grant Musk the massive pay package:
- Musk had too much control
- Directors were influenced by Musk
- The process was unfair
Arguments from Tesla Directors
Tesla directors defended the pay package by claiming it was necessary to ensure Musk’s dedication to the company. They argued that:
- Musk’s attention was crucial for the company’s success
- The pay package aimed to align his interests with the company’s goals
- Musk’s compensation was tied to specific milestones
Ruling in Favor of Shareholder
The case was brought by a small Tesla shareholder, Richard Toretta. The judge ruled in favor of Toretta, stating that the board failed to consider essential questions:
- Was the pay package necessary for Tesla’s success?
- Did Musk need such a large compensation to remain at the company?
Market Response and Musk’s Reaction
Following the court ruling, Tesla’s shares dropped in after-hours trading. Musk responded by suggesting a shift in Tesla’s incorporation to Texas. His lawyer did not immediately comment on the matter, while Toretta’s attorney hailed the ruling as a victory for shareholders.
Hot Take
Shareholders and corporate governance experts are closely monitoring the fallout from the judge’s decision, which challenges the influence and compensation of high-profile CEOs like Elon Musk in major corporations.
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