Musk was to receive a record reward. The payment of an absurdly high amount was rejected by the court

Musk was to receive a record reward. The payment of an absurdly high amount was rejected by the court
Musk was to receive a record reward. The payment of an absurdly high amount was rejected by the court
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Judge Kathaleen McCormick ruled the approval of the remuneration package by the carmaker’s board was wrong and unfair to shareholders. The lawsuit was filed by a shareholder, according to whom the remuneration was excessive. Press agencies inform about it. The judgment can be appealed.

The bonus deal was the largest in Tesla’s history and the largest bonus the company has ever paid out in the United States. She helped Musk become one of the richest people in the world.

The reward to Musk was to be paid in installments upon meeting set goals. The lawsuit alleged that Tesla misled investors by implying that it was very difficult to meet the stated goals, when in fact it was not, according to the lawsuit. Among the performance targets that had to be met are, for example, a certain profitability of the company and the price of its shares on the stock exchange.

Tesla executives said the deal was done so Musk could continue to focus on the company as one of the world’s most dynamic entrepreneurs. But the judge ruled that Tesla and Musk’s lawyers were unable to prove that shareholders were fully informed when they voted. In addition, at the time, Musk had strong ties to the people charged with negotiating for Tesla. McCormick described the amount of the reward as an incomprehensible amount that is not fair to the shareholders. According to her, the package was also negotiated by the company’s directors, who were already swayed by Musk’s rhetoric and his demeanor.

“Given that the court found that Musk has control over the board, it’s hard to justify such a transaction,” Boston College law school professor Brian Quinn told the BBC.

It was “a great day for great people,” according to attorney Greg Varalla, who represents the shareholder who filed the lawsuit in 2018.

Musk v https://twitter.com/elonmusk/status/1752455348106166598 on the judge’s decision, he wrote on his social network X: “Never start a company in the state of Delaware.” Musk is the CEO and major shareholder of Tesla. He sold much of his Tesla stake to buy the X network, then called Twitter, and currently owns about 13 percent of Tesla stock. He recently expressed concern about Tesla’s investments in artificial intelligence (AI) technology and that he would like to own a 25 percent stake in Tesla. According to him, the current shareholder structure makes Tesla vulnerable to a takeover by dubious interests. He would also like to have more control over its direction. Musk also owns several other companies, in addition to X, for example the space company SpaceX and the manufacturer of brain chips Neuralink.

The decision comes as Tesla warns of slowing growth and the electric car industry reevaluates demand. Tesla has become the world’s most valuable carmaker under Musk’s leadership, but much of that value is based on expectations of breakthroughs such as self-driving robot taxis. The court also ruled as Tesla prepares another round of negotiations with Musk over compensation.

Musk does not receive any salary as a director. The 10-year pay deal Musk struck in 2018 would be worth about $51 billion at Tesla’s closing share price on Tuesday. That’s about a quarter of the value of his fortune, which Forbes magazine estimated at around $210 billion. As part of the compensation package, Musk was granted options for about 304 million shares, which he can buy at a price of about $23.33 each. On Tuesday, the stock closed at $191.59. Musk was awarded all 12 installments because Tesla met set operating goals. According to McCormick, Musk has not yet exercised any options, and once he does, he must hold the shares for five years before selling them.

Tesla’s market value at the time the package was negotiated was $50 billion. In 2021, it climbed above one trillion USD in the short term, it is currently around 600 billion USD.

Equilar research analyst Amit Batish estimated in 2022 that Musk’s package is about six times the combined income of the 200 highest-paid executives in 2021, Reuters reported. Equilar conducts executive compensation research.


The article is in Czech

Tags: Musk receive record reward payment absurdly high amount rejected court

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