A Delaware judge has once again invalidated a $56 billion pay package awarded to Tesla's CEO, Elon Musk. The judge ruled that Musk had manipulated Tesla's board and orchestrated the exorbitant compensation plan during deceptive negotiations. This decision came after a Tesla shareholder filed a lawsuit, claiming that shareholders were misled and provided incomplete information when they approved the pay plan in 2018.
Tesla's board members argued that shareholders had re-ratified the pay plan in June after receiving full disclosures, thereby rectifying any issues raised in the initial ruling. However, the judge dismissed this argument, stating that Tesla's lawyers had no basis to reverse her previous decision based on post-trial evidence they presented.
Tesla announced its intention to appeal the ruling to the Delaware Supreme Court, the only state appellate court available for such a case. Legal experts support the judge's decision, emphasizing that Delaware law prioritizes investor protection and prohibits conflicts of interest, even for high-profile CEOs like Musk.
Despite Tesla relocating its legal headquarters to Texas, experts believe the company will have to continue the legal battle in Delaware for this compensation package. Attempting to seek approval in Texas could lead to similar challenges from shareholders due to the excessive nature of the proposed pay package.
Analysts predict that a new pay package for Musk would likely be even larger, considering Tesla's soaring stock prices. Musk has expressed interest in a subsequent pay package that would grant him 25% of Tesla's voting shares, citing the need for increased control as the company delves further into artificial intelligence.
As the legal saga unfolds, the future of Musk's compensation at Tesla remains uncertain, with potential implications for corporate governance and executive pay practices in the industry.
