A judge in Delaware has tossed out a $56 billion USD (worth over $75 billion CAD today) Tesla pay package for Elon Musk.
In her 200-page ruling, Judge Kathaleen McCormick called the figure an “unfathomable sum” that was “unfair” to shareholders.
The package was presented to Musk in 2018 by Tesla directors he had “extensive ties with,” the ruling states. Ira Ehrenpreis, the chair of the compensation committee, had a 15-year business relationship with the company’s founder. Another member, Antonio Gracias, had a 20-year business relationship with Musk, the ruling states.
“Given the collection of people tasked with negotiating on Tesla’s behalf, it is unsurprising that there was no meaningful negotiation over any of the terms of the plan,” McCormick wrote.
Richard Tornetta, a Tesla stockholder, filed the lawsuit in June 2018. He claimed the directors breached “fiduciary duty” that led to Musk’s “unjust enrichment.”
At the time, musk owned 21.9 percent of the company, which gave him “every incentive to push Tesla to levels of transformative growth.” Musk would make $10 billion for every $50 billion increase in the automaker’s value.
“Swept up by the rhetoric of ‘all upside,’ or perhaps starry eyed by Musk’s superstar appeal, the board never asked the $55.8 billion question: Was the plan even necessary for Tesla to retain Musk and achieve its goals?”
Tesla can appeal the ruling.
Musk’s response? A warning to X (formerly Twitter) users not to incorporate their companies in Delaware.
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