Delaware Court of Chancery rejects a pay package initially approved for Musk in 2018
A Delaware judge struck down Elon Musk’s multibillion-dollar pay package at Tesla after finding the process for securing its approval “deeply flawed,” a major setback for the chief executive of the world’s most valuable automaker.
The decision, issued Tuesday in the Delaware Court of Chancery, calls into question how Tesla’s board plans to compensate Musk, a serial entrepreneur with an array of other business interests.
It also puts greater attention on Musk’s personal wealth, much of which is tied up in shares of his companies. He sold a portion of his Tesla shares to help purchase Twitter-turned-X in late 2022.
“The process leading to the approval of Musk’s compensation plan was deeply flawed,” Chancellor Kathaleen McCormick wrote in the opinion, citing Musk’s “extensive ties” with those negotiating his most recent pay deal, which shareholders approved in 2018. The pay package was valued at a maximum of $55.8 billion, McCormick wrote.
Before the opinion landed, Musk had begun pushing for greater control over Tesla, where he’s the largest shareholder with 13% ownership. Earlier this month, he said he feels uncomfortable transforming Tesla into a leader in artificial intelligence and robotics unless he controls around 25% of the company.
Musk’s 2018 pay package, which consisted of 12 tranches of stock options, had fully vested, though he had yet to exercise any of those options.
A Tesla shareholder, Richard Tornetta, asked Delaware’s business-law court to cancel the pay deal, alleging the Tesla CEO controlled the approval process and that the board misled investors, who signed off on it. Musk has said he didn’t dictate the terms of his pay plan. The case went to trial in late 2022.
“Never incorporate your company in the state of Delaware,” Musk tweeted Tuesday after the decision was released. An attorney for the plaintiff praised the decision.
Tesla shares fell 3.6% in after-hours trading Tuesday.
Source: https://www.wsj.com/business/elon-musks-55-billion-tesla-pay-package-struck-down-by-judge-3e619f53