Source: BBC
Delaware judge has invalidated Elon Musk's $55.8 billion (£44 billion) compensation package from electric car manufacturer Tesla, which was paid out in 2018.
Shareholders who felt it was an excessive payment brought the complaint. Kathaleen McCormick, the judge, criticized the pay as "an unfathomable sum" and said it was unfair to the shareholders.
Mr. Musk penned the following: "Never incorporate your company in the state of Delaware" in a post on X, the company he owns (formerly known as Twitter). This compensation package helped propel Elon Musk to the ranks of the world's wealthiest individuals, and it was the largest salary agreement in business history.
Over the course of the week-long trial, Tesla directors contended that the contract was struck in order to guarantee that one of the most dynamic entrepreneurs in the world would continue to focus on the company.
The judge, however, found that neither Tesla nor Mr. Musk's lawyers had "extensive ties with the persons tasked with negotiating on Tesla's behalf" and that neither party could demonstrate that the stockholder decision had been rationally and thoroughly considered.
Professor Brian Quinn of Boston College Law School told the BBC that it is difficult to legitimize a transaction like this "given the judge found Mr. Musk to be in control of the board."
The 201-page decision by Judge McCormick states that Tesla's board's approval of the compensation package was "deeply flawed." In addition, she claimed that the boards of Tesla were "swept up by the rhetoric" surrounding Mr. Musk's "superstar appeal" when they negotiated the remuneration plan.
In an email that was obtained by the Reuters news agency, Greg Varallo, an attorney representing Tesla shareholder Richard Tornetta, who filed the lawsuit in 2018, wished the good men victory.
"People are upset about the size of the pay, but that shouldn't be the main concern," Ray Wang, founder and chief executive of Stanford University's Constellation Research, told the BBC. "If the compensation committee had been properly informed, shareholders would not have a case," he stated. It is possible to take the case to the highest court in Delaware to discuss the decision.
During the extended New York trading session, Tesla shares fell about 2.5 percent. More than 20% of their worth has been lost thus far this year. If you would rather have shareholders decide issues, I suggest incorporating in Nevada or Texas, as Mr. Musk wrote on X.
Next, he put up a survey where his followers could vote on whether Tesla should "change its state of incorporation to Texas, home of its physical headquarters" or not. Rather than his Twitter followers, Professor Quinn said that Tesla stockholders should be asked that question.
"He treats Tesla like his own, but even if he calls himself the 'Technoking of Tesla', he is not the majority owner," he stated. Not only is Elon Musk the CEO and largest shareholder of Tesla, but he also owns X, a social media platform, SpaceX, a rocket company, and Neuralink, a brain chip company.
While Mr. Musk has stated his desire for a larger share in the company, he currently holds approximately 13% of the electric vehicle manufacturer after selling a significant portion of his stake to acquire X.
Many are worried about Tesla's investments in AI technology, according to Mr. Musk. A social media statement from him expressed his discomfort with the idea of turning Tesla into an AI and robotics leader without having 25% voting control.
He wishes he had greater say in Tesla's future and claims the company is open to a "takeover by dubious interests" due to its present ownership structure. "Unless that is the case, I would prefer to build products outside of Tesla," Musk said.
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