A court ruling questions Elon Musk’s $56-billion pay package

A court ruling questions Elon Musk’s $56-billion pay package

In a historic court decision, Elon Musk, the CEO of Tesla, was told to give up his $56 billion pay package. Chancellor Kathaleen McCormick of the Delaware Chancery Court made the 200-page decision. If ruled on by the appellate court, this judgement could significantly diminish Musk’s wealth, which he asserts serves a moral objective by contributing to the human colonization of Mars. The case’s outcome is subject to a possible appeal by Musk, which would lead to a complete overhaul of Musk’s compensation plan, potentially causing a significant drop in Musk’s net worth.

Appellate Court’s Musk Compensation Plan Redesign

The judge found that the directors who negotiated the share-based compensation appeared to be loyal to Musk, who is currently Forbes magazine’s richest person. Tesla’s 10-year pay agreement with Musk reached in 2018 would be worth around $51 billion at the closing price for Tesla stock, accounting for the cost to Musk to exercise the options. According to Forbes magazine’s calculations, this would represent about a quarter of Musk’s $210.6 billion fortune.

Independence Issues Among Tesla’s Board Members

The ruling comes at a time when Tesla is getting ready to talk about pay with the CEO again. Musk said he wouldn’t want to run Tesla unless he had 25% of the voting power. Things would not be talked about until McCormick made a decision. The ruling showed that many of the directors on Tesla’s board, including current members Kimbal Musk, Elon Musk’s brother, and James Murdoch, the son of media tycoon Rupert Murdoch, lacked independence due to their close personal ties with the CEO. Two of Tesla’s other current directors, Robyn Denholm and Ira Ehrenpreis, exhibited a lack of independence in the pay decision.

Tesla’s directors said in court that the company was paying Musk to keep focusing on the electric car company. Tornetta’s lawyers claimed that the Tesla board never informed shareholders that the goals were easier to achieve than the company admitted and that internal projections showed Musk would soon qualify for a large portion of the pay package.

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