Washington:
Tesla owner Elon Musk has received a big blow from the American court. In fact, a US judge upheld his decision to reject Elon Musk’s massive compensation package of $55.8 billion at Tesla. The judge announced his decision on Monday. Musk’s attempt to reinstate the pay deal through a shareholder vote was rejected. Kathleen McCormick, Chancellor of the Court of Chancery of Delaware, announced her decision. That said, Tesla’s effort to ratify Musk’s compensation package through a June shareholder vote cannot override his January decision, which called the package excessive and unfair to shareholders.
Tesla will appeal against the decision
McCormick found numerous flaws in Tesla’s ratification attempt, including significant misstatements in documents provided to shareholders about the impact of their votes. “The proposal to amend is rejected,” McCormick wrote. “A large and talented group of defense firms have shown creativity with their ratification arguments, but their unprecedented principles run counter to established law,” he said. However, in a statement on Musk’s X social media platform, Tesla said it would appeal the decision.
Elon Musk’s reaction to the court’s decision
“Shareholders should control the company’s votes, not the judge,” Musk said in a separate post. The court also ordered him to pay $345 million in attorney fees to Tesla shareholder Richard Tornetta. This is much less than the $5.6 billion demanded by lawyers. Their calculation method was technically correct under Delaware law, which sets fees based on a percentage of profits received.
Shareholders originally supported the Musk compensation plan in March 2018, which was specifically designed to reward the 53-year-old founder for significant growth at Tesla. But in a lawsuit, Tornetta accused him of failing in his duties and alleged that Musk dictated his own terms to directors who were not sufficiently independent from their star CEO.
What are the allegations against Elon Musk?
He also accused Musk of “improper enrichment” and called for the scrapping of a pay program that helped make the tech giant the richest man in the world. During a lawsuit in 2022, Musk responded that investors in Tesla were some of the “most influential people in the world” and were able to keep an eye on his management. He said that Tesla has been a laughing stock in the auto industry, but the huge success of the company’s Model 3 has changed things.
Musk denied his role in the package
Musk insisted he had no role in bringing about the package nor did he discuss his deal with the board members, some of whom were close friends, who ultimately signed off on it. The Delaware Court of Chancery has been a pillar of American capitalism for more than a century and is the jurisdiction where nearly two-thirds of America’s Fortune 500 companies are registered. On Monday, Musk reposted other users’ posts calling on companies to leave Delaware.
