Tesla CEO’s $56bn pay package rejected once again

On Monday, a judge ruled that Tesla CEO is still not entitled to receive a $56bn compensation package even though shareholders of the EV maker had voted to reinstate it six months back. This verdict by the Delaware judge, Kathaleen McCormick of the court of chancery, follows her January ruling that termed the pay package excessive and rescinded it, surprising investors. The verdict cast uncertainty over Musk’s future at the world’s most valuable carmaker. Tesla’s board argued that the huge payment scheme was required to keep Musk involved in the company, an argument that the tech magnate, already the world’s wealthiest man, echoed.

Judge has also ordered Tesla to pay the attorneys who brought the case $345m, far short of the billions they initially demanded. EV maker has said in court filings that the judge should take into account a June vote by its shareholders in favour of the pay package for CEO Musk, the EV maker’s driving force who deserves credit for many of its advances, and reinstate his compensation. Tesla and its shareholders argued that CEO Musk had touched the milestones originally stipulated when the pay package was drawn up.

Tesla originally devised CEO’s payment package in 2017, setting certain conditions for Musk to receive 12 different tranches of stock options depending on whether the EV maker hit certain revenue and market targets. Shareholders accepted that package by a wide margin in 2018, but one particular investor filed a lawsuit claiming that the board had been misleading and the pay package was unfair. Some prominent shareholders like the California state teachers’ retirement system and Norway’s sovereign wealth fund voted against the package but to no avail.

When the package was approved in June, Musk said on stage at a Tesla event: “I just want to start off by saying, hot damn, I love you guys!” He did not instantly respond to McCormick’s most recent verdict, but he has castigated her in the past and advised other business owners to stay away from Delaware, where most US companies file their incorporation paperwork owing to friendly tax policies. Musk shifted Tesla’s physical headquarters from California to Texas, however the pay package case continued before the Delaware judge.

McCormick has ruled that Tesla’s board was under improper influence of Musk

McCormick ruled that Tesla’s board was under improper influence of Musk when it adopted the billionaire’s plan in 2018. It is the first but second time she rejected the pay package as excessive, sticking with her original January finding after shareholders backed the plan and Tesla CEO Musk asked her to reconsider. “There were undoubtedly a range of healthy amounts that the board could have decided to pay Musk,” McCormick wrote in her 101-page decision. “Instead, the board capitulated to Musk’s terms.”