Musk forced to return $55 billion in compensation from Tesla

Elon Musk He is not entitled to a historic compensation package given to him by Tesla’s board of directors that could be worth more than $55 billion, a Delaware judge determined Tuesday.

The judge Kathaleen St. Jude McCormick made its decision more than five years after an investor lawsuit was filed against Musk, CEO of Tesla, and other company executives. They were accused of failing to fulfill their obligations to the electric vehicle and solar panel manufacturing company, which amounted to a waste of corporate assets and the unjust enrichment of Musk.

The plaintiff’s attorneys argued that the package should be set aside because it was made at the behest of Musk and was the product of fraudulent negotiations with directors who were not independent of him. They added that it had been approved by investors who received misleading and incomplete information in a third-party statement.

For their part, defense attorneys pointed out that the compensation plan was negotiated fairly by a committee of independent directors, contained payments for achieving goals so ambitious that they had been ridiculed by Wall Street investors, and was approved in a vote of shareholders that was not even mandatory under Delaware law.

They also claimed that Musk did not have a controlling stake in the firm because he owned less than a third of the company at the time.

A lawyer from Musk and other defendants did not initially respond to an email seeking comment.

However, Musk responded to the ruling on X, the social network formerly known as Twitter that he owns, by offering business advice. “Never form your company in the state of Delaware“, he claimed. Then he added that “I recommend registering it in Nevada or Texas if you prefer that investors make the decisions”.

Musk, who on Tuesday led Forbes’ list of the world’s richest people, this month challenged Tesla’s board to draw up a new compensation plan for him that would give him a 25% stake in the company. In a results presentation last week, Musk, who now has 13%, explained that with 25% he could not control the firm but would have great influence.

In a trial deposition in November 2022, Musk denied that he dictated the terms of the compensation package or that he attended any meetings about the plan held by the board, his compensation committee or a working group that helped craft it. .

However, McCormick concluded that as Musk was an investor with control of the firm and a possible conflict of interest, the payment package had to be subject to stricter standards.

McCormick noted that the only appropriate remedy was to terminate Musk’s compensation package. “In the final analysis, Musk initiated an automatic process, recalibrating speed and direction along the road as suited him,” wrote. “The process reached an unfair price. And through this litigation, the plaintiff demands a refund.”