Musk’s $55.8 billion Tesla pay deal thrown out again by US judge

A US judge on Monday upheld his decision to reject Elon Musk’s massive $55.8 billion compensation package at Tesla, denying any attempt to restore the pay deal through a shareholder vote.

In a court filing, Chancellor Kathaleen McCormick of the Delaware Court of Chancery ruled that Tesla’s attempt to ratify Musk’s compensation package through a shareholder vote in June could not overturn its decision to January canceling the program as excessive and unfair to shareholders.

McCormick found multiple flaws in Tesla’s ratification attempt, including “material inaccuracies” in documents provided to shareholders about the effect of their vote.

“The motion to reconsider is denied,” McCormick wrote.

“The large and talented group of defense companies have been creative with the ratification argument, but their unprecedented theories run counter to multiple trends in established law,” she added.

In a statement on Musk’s X social media platform, Tesla said it would appeal the verdict.

“Shareholders should control the company’s votes, not judges,” Musk said in another post.

The court also awarded $345 million in attorney’s fees, significantly less than the $5.6 billion requested by lawyers for plaintiff Richard Tornetta, a Tesla shareholder.

While acknowledging that their method of calculation was technically sound under Delaware law, which bases fees on the percentage of profits obtained, McCormick ruled that such a large compensation would constitute an excessive windfall.

Shareholders initially supported Musk’s compensation plan in March 2018, which was specifically designed to reward the 53-year-old founder for Tesla’s significant growth.

But in a lawsuit, Tornetta accused the defendants of breaching their duties when they authorized the compensation plan and alleged that Musk dictated his terms to directors, who were not sufficiently independent from their star CEO.

He also accused Musk of “unjust enrichment” and called for the cancellation of a compensation package that helped make the entrepreneur the world’s richest man.

At a 2022 trial, Musk countered that investors in Tesla were among the “most sophisticated in the world” and capable of keeping tabs on its management.

He said Tesla had been the laughing stock of the auto industry and it was only the massive success of the company’s Model 3 that changed the game.

Musk insisted he had no role in crafting the package or discussing its agreement with the board members, some of whom were close friends, who ultimately signed it.

The Delaware Court of Chancery has been a pillar of American capitalism for more than a century and is the jurisdiction where approximately two-thirds of America’s Fortune 500 companies are registered.

Musk on Monday reposted other users’ X-rated posts calling for companies to leave Delaware.

© 2024 AFP