In a landmark decision, a Delaware court has ordered Tesla to undo Elon Musk’s controversial $56 billion compensation package, which was granted to the tech billionaire in 2018. The ruling stems from a lawsuit filed by Tesla shareholders who argued that the process leading to the package’s approval was improper.
The decision was handed down by a Delaware Chancery Court judge on Tuesday, marking a significant setback for Musk, who has become the world’s richest person in part due to the generous compensation package. The package entitled Musk to stock options in Tesla as the company hit specific performance targets.
According to the court, the process that led to the approval of the package was unfair to Tesla shareholders. The court did not provide details on how the package should be undone, leaving it up to Tesla and Musk to determine the next steps.
The ruling is a major victory for Tesla shareholders who have long argued that Musk’s compensation package was not in the best interest of the company. The shareholders, who filed the lawsuit in 2019, claimed that the package was the result of a biased process that favored Musk over other shareholders.
Musk’s compensation package was approved by Tesla’s board of directors in 2018, and it entitled him to receive stock options worth $56 billion over a 10-year period. The package was designed to incentivize Musk to increase Tesla’s market value, and it was tied to specific performance targets.
However, the shareholders argued that the package was not subject to an independent review, and that the board did not consider other compensation packages that would have been more beneficial to the company. They also claimed that the package was not in line with Tesla’s corporate governance practices.
In her ruling, the judge agreed with the shareholders, stating that the process leading to the approval of the package was not fair to Tesla shareholders. The judge noted that the board did not consider other compensation packages, and that the package was not subject to an independent review.
The ruling is likely to have significant implications for Tesla and Musk. It is unclear at this time how the package will be undone, and what impact the decision will have on Tesla’s market value. However, the decision is a clear indication that Tesla’s board and Musk must be more transparent and accountable in their decision-making processes.
The decision is also a reminder of the importance of corporate governance and the need for independent review of compensation packages for top executives. The ruling highlights the need for boards.
What is Tesla pay package?
Tesla’s pay package for Elon Musk, which was granted in 2018, is a compensation plan that is worth up to $56 billion over a 10-year period. The package is tied to specific performance targets, and it is designed to incentivize Musk to increase Tesla’s market value.
Under the terms of the package, Musk is eligible to receive stock options in Tesla as the company hits specific market value milestones. For example, if Tesla’s market value reaches $100 billion, Musk would be entitled to receive a certain number of stock options. The package includes a total of 12 market value milestones, with each milestone increasing the value of the stock options that Musk is eligible to receive.
The package was approved by Tesla’s board of directors in 2018, and it was designed to align Musk’s interests with those of Tesla’s shareholders. However, the package has been the subject of controversy, with some shareholders arguing that it was not subject to an independent review and that the board did not consider other compensation packages that would have been more beneficial to the company.
In 2021, a Delaware court ruled that the process leading to the approval of the package was unfair to Tesla shareholders and ordered the company to undo the package. The decision has significant implications for Tesla and Musk, and it highlights the importance of corporate governance and the need for independent review of compensation packages for top executives.
