by Key Takeaways
- A judge in Delaware has decided not to reinstate Elon Musk’s $56 billion Tesla compensation package.
- The compensation agreement received its first authorization in 2018.
- The decision raises more questions over Musk’s future at Tesla.
Elon Musk, the CEO of Tesla, has had his contentious $56 billion remuneration plan revoked by Delaware Chancery Court Judge Kathaleen McCormick.
The ruling, which was made public on Monday and covered by The Guardian, dismisses Tesla’s claims that the huge compensation agreement should be reinstated even after shareholders approved it in June.
Context of the Pay Package Conflict
The pay package, which was first announced in 2017, was designed to grant Elon Musk 12 tranches of stock options based on Tesla hitting particular sales and market capitalization goals.
Even though the deal was accepted by shareholders in 2018, it was criticized for being unjust and expensive. After that, one investor filed a lawsuit against Tesla, claiming that the board had deceived investors throughout the approval process.
Judge McCormick took the plaintiff’s side in January, deeming the package “excessive.” Her decision nullified the compensation agreement, raising questions about Musk’s future with the massive electric car company.
Musk had fulfilled the terms of the initial agreement, according to Tesla and its shareholders, including those who supported the package’s reinstatement in June. Still, McCormick stood her ground.
In contrast to the billions they had originally requested, McCormick ordered Tesla to pay $345 million in legal expenses to the lawyers who pursued the case.
Tesla’s Justification for Musk’s Payment
Both Musk and the Tesla board have maintained that the compensation deal was essential to keeping the billionaire in charge. Musk has repeatedly emphasized how crucial he was to Tesla’s financial and technological achievements.
The California State Teachers’ Retirement System and Norway’s sovereign wealth fund, among other well-known institutional investors, protested the pay package when it was first approved. The package received support from the majority of shareholders in spite of their objections.
