A Delaware judge ruled Tuesday in favor of Tesla shareholders who sued to block the pay package that helped make Elon Musk, the automaker's chief executive, a multi-millionaire and the richest human being. of the world.
“The process that led to the approval of Musk's compensation plan was deeply flawed,” Chancellor Kathaleen St. J. McCormick of the Delaware Court of Chancery said in the decision. She ordered that the contract that provided her with the record salary be voided.
A group of Tesla shareholders had questioned a stock option package that ended up giving Musk the right to acquire Tesla shares worth more than $70 billion when the stock price was higher. To receive the award, one of the largest of its kind and widely imitated by other corporations, Tesla had to meet certain revenue, profit and stock price targets.
The lawsuit took on added importance after Musk's acquisition of Twitter in 2022. He faced widespread criticism for spending time trying to overhaul Twitter as Tesla's stock plummeted and its growth slowed amid growing competition. One justification for Musk's pay package at Tesla was that it was a way to keep him focused on car manufacturing.
The case also raised questions about Tesla's corporate governance and whether the board of directors, which includes several close friends of Musk and his brother, Kimbal, does anything to curb Musk's behavior. The lawsuit contended that Musk had played a significant role in shaping his pay package.
The judge agreed. “In the final analysis,” he wrote, “Musk launched a process of autonomous driving, recalibrating speed and direction along the road as he saw fit. “The process came at an unfair price.”
Musk also testified during the trial, suggesting that his impact on the auto industry justified his salary. “Tesla has had an immense effect on the world,” he said. “It's not just Tesla that's making electric vehicles – we've really been the main reason the rest of the auto industry has moved toward sustainable electric vehicles.”
The case was heard in Delaware because Tesla, like many companies, is incorporated there.
This is a developing story. Please check back for updates.
