September 27, 2024
Elon musk tesla

Judge Elon Musk of the Delaware Court of Chancery has decided that Musk will not receive the $55 billion compensation package after all. The decision implies that Tesla’s board will have to draft a fresh idea.

According to Bloomberg, Musk’s wealth might be jeopardised if the decision is upheld on appeal. Musk might only be the third richest person in the world without the alternatives in that package.

The package, which provided Musk incentives to meet certain benchmarks, including a market capitalization of $650 billion—more than ten times Tesla’s worth at the time—was accepted by Tesla shareholders in 2018. One particular topic dominated the trial: did Musk mislead the shareholders when he presented them with the plan?

The investor who filed the lawsuit, Richard Tornetta, was represented by Greg Varallo, who stated that neither the investors nor the board members were informed that Musk originated the proposal. Judge Kathaleen McCormick referred to this argument as a “kill shot” in February of last year.

Tesla shareholders approved the package in 2018

According to McCormick’s judgement, “Defendants were unable to prove that the stockholder vote was fully informed because the proxy statement misleadingly omitted details about the process and inaccurately described key directors as independent.” “The defendants demonstrated that Musk was a singularly driven individual with lofty objectives, and that Tesla genuinely required Musk’s success for Musk to advance to the next level of its development, but these facts do not excuse the most generous compensation plan in the annals of public markets.”

How much of Tesla Musk had under his direct control, beyond merely his shares, was one of the case’s major concerns. McCormick stated that Musk “wielded the maximum influence that a manager can wield over a company.”

Elon musk tesla

Many of the individuals on the board of directors were close associates of Musk’s:

  • Musk Elon
  • Antonio Gracias is a friend of Elon Musk’s who serves on the remuneration committee and has accumulated a substantial fortune from PayPal investments in Musk’s businesses.
  • James Murdoch, a second Musk friend who travelled the world with Musk on vacation.
    Kimbal, the brother of Musk.
  • One of the pay committee members, Ira Ehrenpreis, admitted in court that his interactions with Kimbal and Elon Musk had a “significant influence on his professional career.”
  • Another committee member on pay, Brad Buss, “owed 44 percent of his net worth to Musk entities.”
  • Robyn Denholm, the head of the Tesla board and member of the pay committee, received more money from Tesla than she did from any other source.
  • Linda Johnson Rice seems to have had a very autonomous life.
  • Steve Jurvetson, who was absent for a significant portion of this episode and was not seen by the judge as a prominent role.
  • In the end, McCormick concluded, “the key witnesses said it all: they were there to work with Musk, not negotiate against him.”

“They were there to cooperate with Musk, not negotiate against him.”

Recently, Musk has made demands for increased control over Tesla. Earlier this month, he stated on X that he needed at least 25% of the firm to undertake work on artificial intelligence. That would be almost twice as much as his present ownership position, which is about 13 percent.

In subsequent tweets, Musk stated that he was awaiting the outcome of the shareholder action before presenting his request for a bigger ownership position to the board. He said on January 15th, “We are still awaiting a decision in my Delaware compensation case, which is the reason for no new ‘compensation plan.'” “That trial took place in 2022, but a decision has not yet been reached.”

“I put compensation plan” in quotations because, in his words, this is really about making sure that Tesla has the appropriate level of voting influence.

Musk commented, “Never incorporate your company in the state of Delaware,” minutes after today’s judgement.

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