A Delaware judge ruled Monday that Tesla CEO Elon Musk is still not entitled to a $56 billion compensation package, despite the electric vehicle company’s shareholders voting to reinstate him.
The decision by the judge, Chancellor Kathaleen McCormick of the Court of Chancery, follows her January ruling that called the pay package excessive and struck it down, surprising investors and casting uncertainty over Musk’s future at the most valuable carmaker in the world.
Musk did not immediately respond to an emailed request for comment.
Tesla has said in court filings that the judge should recognize a later June vote by its shareholders in favor of a pay package for Musk, the company’s driving force behind many of its advances, and restore his compensation. .
McCormick said Tesla’s board had no right to hit the “reset” to restore Musk’s pay package.
“If the court were to condone the practice of allowing defeated parties to create new facts for the purpose of reviewing decisions, lawsuits would become endless,” she said in her 101-page opinion.
She also said Tesla made numerous material errors in its proxy statement about the vote and could not claim the vote was a “cure” to justify restoring Musk’s pay.
“Taken together,” the problems with Tesla’s arguments “pack a powerful punch,” she wrote.
Tesla shares fell 1.4% in after-hours trading after the decision.
McCormick also ordered Tesla to pay the lawyers who brought the case $345 million, far less than the $6 billion they originally sought. She said the fee could be paid in cash or Tesla stock.
“We are pleased with Chancellor McCormick’s decision, which rejected Tesla’s invitation to inject continued uncertainty into the litigation,” said a statement from Bernstein Litowitz Berger & Grossmann, one of three law firms for the plaintiff.
The law firm also said it looked forward to defending the court’s opinion if Musk and Tesla appeal.
Musk and Tesla may appeal to the Delaware Supreme Court once McCormick enters a final order, which could come as soon as this week. The appeal may take up to a year to develop.
After the January ruling, Tesla shareholders flooded the court with thousands of letters arguing that Musk’s pay cut raises the possibility that he will leave Tesla or develop certain products such as artificial intelligence in ventures other than Tesla.
Lawyers for shareholder Richard Tornetta, who sued in 2018 to challenge Musk’s compensation package, had argued that Delaware law doesn’t allow a company to use a ratification vote to essentially overturn a lawsuit’s decision.
McCormick in January disclosed that Musk improperly controlled the 2018 board process to negotiate the pay package. The board had said Musk deserved the package because he hit all the ambitious targets for market value, revenue and profitability.
But the judge criticized Tesla’s board as “subservient” to Musk, saying the compensation plan was proposed by a board whose members had conflicts of interest because of close personal and financial ties to him.
After the January ruling, Musk criticized the judge on his X social media platform and encouraged other companies to follow Tesla’s lead and reincorporate in Texas from Delaware, though it’s unclear if any companies have done so.
The judge in her January ruling called the pay package “the largest compensation plan ever — an outrageous amount.” It was 33 times larger than the next largest executive compensation package, which was Musk’s 2012 pay plan.
As of Monday, the pay package was worth $101.4 billion, according to Equilar, a compensation consulting firm.
Musk’s 2018 pay package gave him stock grants worth about 1% of Tesla’s equity each time the company hit one of 12 tranches of operational and financial growth goals.
Musk has not received any guaranteed salary. Tornetta argued that shareholders were not told how easily the goals would be achieved when they voted on the package.
#Elon #Musk #Teslas #billion #pay #package #rejected #Delaware #judge
Image Source : nypost.com