Elon Musk’s record US$56b Tesla pay plan rejected again by US judge
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The ruling comes just after Mr Elon Musk’s wealth hit an all-time high thanks to a Tesla stock rally following the US presidential election.
PHOTO: REUTERS
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WILMINGTON - Mr Elon Musk’s record-setting Tesla pay package was again rejected by a Delaware judge, even after shareholders supported reinstating it.
Despite the June 13 shareholder vote at the company’s annual meeting, Delaware Chancery Court Judge Kathaleen Saint Jude McCormick decided to stick with her original finding in January that the company’s board was too much under the influence of the billionaire entrepreneur when it adopted the plan in 2018.
The stock options package was initially worth US$2.6 billion (S$3.48 billion) and spiked to US$56 billion by the time the judge cancelled it. The package was worth US$101.5 billion at Dec 2’s closing price.
Judge McCormick’s ruling striking down the highest-ever pay arrangement for a US corporate executive could take a giant bite out of Mr Musk’s wealth. Even without the payout, he remains the world’s richest person. Tesla shares fell 1.4 per cent in after-hours trading.
The ruling comes just after Mr Musk’s wealth hit an all-time high – surpassing the previous record of US$340.4 billion set in November 2021 – thanks to a Tesla stock rally following the presidential election
Richest person
Mr Musk, 53, spent much of October campaigning for US President-elect Donald Trump, including speaking at a Madison Square Garden rally in New York City about a week before the election.
The President-elect has tapped Mr Musk to co-lead a cost-cutting effort that the new administration is calling “Doge”, or the “Department of Government Efficiency”.
Tesla and its board, which includes Mr Musk, did not immediately respond to a request for comment.
In Dec 2’s ruling, McCormick awarded US$345 million to the lawyers who fought Mr Musk and Tesla to kill the pay plan.
While that amount was far less than the attorneys’ request to be compensated with 29 million Tesla shares – more than US$10 billion at the company’s current share price – it is still among the largest lawyer paydays in the history of US litigation.
“We hope that the chancellor’s well-reasoned decision will end this matter for the shareholders of Tesla,” said lawyers at the firm of Bernstein Litowitz Berger & Grossmann, who won the ruling on behalf of shareholder Richard Tornetta.
Possible appeal
Mr Musk now has 30 days to decide whether to appeal Judge McCormick’s ruling under Delaware law. Unlike the US Supreme Court, the state’s highest court reviews all appeals of lower court rulings.
The billionaire is expected to contest Judge McCormick’s finding that Tesla directors awarded him excessive compensation because they were handcuffed by conflicts of interest.
He had previously said he needed a bigger stake in Tesla to maintain control of the electric-car maker and expand further into artificial intelligence.
“There were undoubtedly a range of healthy amounts that the board could have decided to pay Musk,” Judge McCormick wrote in her 101-page decision. “Instead, the board capitulated to Musk’s terms.” BLOOMBERG
