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Elon Musk Denied Landmark Compensation Package Worth Over $55 Billion
Delaware Judge Rules Against Tesla CEO
Elon Musk, the CEO of Tesla, has been denied a landmark compensation package that could have been worth more than $55 billion, according to a ruling by Chancellor Kathaleen St. Jude McCormick on Tuesday. The ruling comes after a five-year-long shareholder lawsuit, accusing Musk and Tesla directors of breaching their duties to the company and resulting in unjust enrichment for Musk.
Judge Decision: Compensation Package Deeply Flawed
The court case centered around the argument that the compensation package was voided because it was dictated by Musk and involved sham negotiations with non-independent directors. Shareholders were claimed to have been given misleading and incomplete disclosures in a proxy statement. Defense attorneys asserted that the pay plan was fairly negotiated by an independent compensation committee and contained highly ambitious performance milestones.
Shareholders Applaud the Decision
Responding to the ruling on the social media platform X, Musk offered business advice and remarked, “Never incorporate your company in the state of Delaware.” Shareholder attorneys lauded the decision, praising the judge for reversing an “absurdly outsized” pay package for Musk. The ruling was seen as a significant legal decision with far-reaching implications.
Flawed Process and Conflicts of Interest
Chancellor McCormick found that Musk, being a controlling shareholder, had extensive ties with the individuals involved in negotiating the compensation package on behalf of Tesla. The judge specifically cited Musk’s business and personal relationships with compensation committee chairman Ira Ehrenpreis and committee member Antonio Gracias. McCormick also raised concerns over the involvement of general counsel Todd Maron, who had previously served as Musk’s divorce attorney.
Compensation Package to be Rescinded
Given the conflicts of interest and a flawed negotiation process, Chancellor McCormick concluded that the only appropriate remedy was to rescind Musk’s compensation package. The judge emphasized that Musk had wielded considerable control over the process and the resulting price was unfair.
