A judge in Delaware has invalidated the $55.8 billion pay package awarded to Elon Musk by Tesla in 2018, following a lawsuit filed by a shareholder who claimed it was an excessive payment.
The judge, Kathaleen McCormick, described the compensation as “an unfathomable sum” and ruled that Tesla and Musk’s attorneys failed to prove that the shareholder vote was fully informed.
Musk, in a post on Twitter (formerly known as Twitter and now referred to as X), wrote, “Never incorporate your company in the state of Delaware.”
The pay deal, the largest in corporate history, had made Musk one of the world’s wealthiest individuals.
During the trial, Tesla directors argued that the deal was necessary to ensure Musk’s continued commitment to the company.
However, the judge determined that Musk’s ties with those negotiating on Tesla’s behalf were extensive and that he was in control of the board.
Judge McCormick’s 201-page ruling stated that the approval process for the pay package was “deeply flawed” and criticized Tesla directors for being influenced by Musk’s “superstar appeal.”
The shareholder’s attorney, Greg Varallo, called it a “good day for the good guys,” emphasizing the flawed approval process.
The ruling can be appealed to the Delaware Supreme Court. Tesla’s shares fell around 2.5% in extended New York trade after the decision.
Musk suggested on Twitter that companies should incorporate in Nevada or Texas for shareholder decision-making, prompting a poll about relocating Tesla’s incorporation to Texas.
The CEO, who owns about 13% of Tesla, expressed concern about the company’s vulnerability to a takeover by “dubious interests” due to its current shareholder structure.
Musk desires greater control over Tesla’s direction, particularly in the context of AI and robotics investments, stating that without more control, he would prefer to develop products outside of Tesla.
Source-BBC
