Musk’s reparation was described by the judge as a “unfathomable quantity.”
In 2018, Tesla presented Elon Musk with a salary package worth $56 billion, which contributed to his rise to the top of the list of the richest people in the world. Now, a judge in Delaware has declared the agreement that was made between the company and the CEO to be unconstitutional. The judge also referred to the remuneration as a “unfathomable sum” that causes shareholders to be treated unfairly. In accordance with what was previously observed and published by Chancery Daily on Threads, the court of Chancery in Delaware has made public its decision about the lawsuit that was submitted by Richard Tornetta. In a statement, the Tesla shareholder claimed that the manufacturer had violated its fiduciary duties by authorising a deal that would unfairly enrich the company’s chief executive officer.
Because Musk “enjoyed thick ties” with the directors who were in charge of negotiating his pay package on behalf of Tesla, the judge Kathaleen McCormick noted in the verdict that there “was no meaningful negotiation over any of the terms of the plan.” This indicates that Musk’s pay package was not negotiated seriously. In addition, the judge discussed the fact that Musk owned 21.9 percent of the automobile manufacturer at the time that the package was being negotiated. The fact that he stood to make $10 billion for every $50 billion increase in market capitalization provided him with “every incentive to push Tesla to levels of transformative growth,” as the phrase puts it.
“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?” The judge stated in the statement filed with the court. It has been reported by The Washington Post that she has declared that Tornetta is entitled to a “rescission,” and she has ordered Tesla and its shareholders to carry out her decision and undo the deal. Musk’s camp, on the other hand, has the ability to appeal her decision.
Since the time that his compensation package was authorised, Musk has sold some of his Tesla stocks in order to assist in the payment of his acquisition of Twitter, which is now known as X. Even though he currently owns approximately 13 percent of Tesla, he has stated that he wants to have 25 percent ownership over the company before he is satisfied with the idea of growing it to become a leader in artificial intelligence and robotics.
Elon Musk issued the following tweet in response to the verdict made by the court: “Never incorporate your company in the state of Delaware.” Moreover, he published a poll on his website, in which he inquired of his followers whether or not Tesla ought to shift its state of incorporation to Texas, which is the location of its physical headquarters.