Judge Rules Against Elon Musk’s Tesla Compensation Plan

Delaware Judge Rules Against Elon Musk’s Pay Package

A Delaware judge ruled in favor of Tesla shareholders who sued to block the pay package that made Elon Musk, the carmaker’s CEO, a billionaire many times over and the world’s wealthiest person.

“The process leading to the approval of Musk’s compensation plan was deeply flawed,” Chancellor Kathaleen St. J. McCormick of the Delaware Court of Chancery said. She ordered that the contract providing his record pay be voided.

A group of Tesla shareholders challenged a stock options package that ended up giving Mr. Musk the right to acquire Tesla shares worth over $70 billion. To receive the award, which was one of the largest of its kind, Tesla had to meet certain revenue, profit, and share price goals.

The lawsuit took on added significance after Mr. Musk’s acquisition of Twitter in 2022. He faced widespread criticism for spending time trying to overhaul Twitter while Tesla’s shares slumped and its growth slowed amid rising competition.

The case also questioned Tesla’s corporate governance and whether the board does anything to rein in Mr. Musk’s behavior. The lawsuit contended that Mr. Musk played a significant role in shaping his pay package.

The judge agreed, stating, “In the final analysis, Musk launched a self-driving process, recalibrating the speed and direction along the way as he saw fit. The process arrived at an unfair price.”

Mr. Musk also testified during the trial, suggesting that his impact on the car industry justified his pay. “Tesla has had an immense effect on the world,” he said. “Not just that Tesla is making electric vehicles — we have been really the main reason why the rest of the car industry has moved toward sustainable, electric vehicles.”

The case was heard in Delaware because Tesla, like many companies, is incorporated there.

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