A Delaware judge has rejected Elon Musk’s controversial $56 billion compensation plan, a deal that would have made Musk one of the highest-paid executives in history, contingent on Tesla achieving ambitious growth targets. The ruling follows a lawsuit filed by Tesla investor Richard Tornetta, who argued that the board of directors misled shareholders during the approval process. The judge found that the company’s proxy statement misrepresented the independence of key directors and omitted vital information about the compensation structure.
Source:- bbc news
Musk’s pay package, which did not guarantee any salary, was based on meeting 12 performance milestones tied to Tesla’s financial and operational growth. Although Musk successfully met all 12 targets, which significantly contributed to Tesla’s expansion, the court found the approval process flawed. Tornetta and his legal team contended that the targets were made easier to achieve than acknowledged, and internal projections suggested that Musk was on track to earn large portions of the pay, even if the targets were softened.
Source:- news 18
Tesla, in defense of the deal, argued that it was designed to retain Musk, a key factor behind the company’s success. The automaker’s defense team emphasized that the deal had helped Tesla rise to prominence under Musk’s leadership. However, the court ruled that shareholders had not been fully informed about the process, which cast doubt on the fairness of the approval.
The court’s decision is a major blow to Musk’s financial interests and raises questions about Tesla’s corporate governance. It also draws attention to the potential for future reforms in how executive pay packages are negotiated and approved in public companies. The ruling may be appealed to the Delaware Supreme Court, which could further delay final resolution.
In response to the ruling, Musk posted his frustration on social media, expressing dissatisfaction with Delaware’s legal framework and questioning the state’s role in corporate governance. He even floated the idea of moving Tesla’s headquarters from California to Texas. The court’s decision could influence upcoming compensation discussions at Tesla, especially as Musk continues to lead the company amidst its expansion into AI and other technologies.
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