Here’s something you can add to the list of things that Elon Musk will complain about loudly and frequently on his social media platform X.
A Delaware judge voided the billionaire’s Tesla pay package on Tuesday, reports The New York Times. The judge found the package, which has helped make the executive one of the richest humans in history, to be excessive and now wants Musk to return the unnecessary pay.
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The unexpected ruling is a result of a lawsuit from Tesla shareholders. In 2018, Musk and the Tesla board devised a package consisting of lucrative stock options if the company achieved certain revenue, profit, and sharing goals, according to the paper. This would allow Musk to acquire around 304 million Tesla at a preset price of $23.34 if they were met. They were, which meant the executive was due $51.1 billion worth of stock (as of the end of trading on Tuesday), which was issued in 12 separate grants tied to a specific goal. As part of the agreement, Musk would have to hold onto the stock for at least five years.
Tesla shareholders challenged this package, and, on Tuesday, Chancellor Kathaleen St. J. McCormick of the Delaware Court of Chancery sided with them. The judge found that the company’s eight-person board included several people close to Musk, including his brother Kimbral, who owed much of their wealth to the executive, effectively allowing him to dictate the terms. She noted that the package was not necessary to retain or motivate Musk, since he already owned tens of billions of dollars worth of Tesla stock, and that the information given to shareholders when they voted to approve the plan was “materially deficient.”
“The process leading to the approval of Musk’s compensation plan was deeply flawed,” Chancellor McCormick said.
Musk has since posted on X that you should “Never incorporate your company in the state of Delaware,” and shared screenshots of a Wall Street Journal op-ed titled “Delaware Is Trying to Drive Away Corporations.” Tesla, meanwhile, did not immediately respond to a request for comment. The EV maker disbanded its media relations team back in the fall of 2020.
Because of the ruling, which will certainly be appealed, Musk’s shares will be canceled, according to a lawyer for the shareholders. This will reduce both his personal fortune, which currently stands at $181.4 billion, and his stake in Tesla, which currently stands at 13 percent after he sold shares to fund the acquisition of X back when it was still known as Twitter.
In light of the ruling, it will be interesting to see how the board now responds to Musk’s claim last month that he needs to own 25 percent of Tesla to expand its AI efforts. If he didn’t, he said he would “prefer” to develop such projects outside the company.
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