A judge in Delaware just delivered a hard kick to Elon Musk’s ego yesterday by ruling that his compensation scheme at Tesla that should have delivered him $55 billon cannot stand. Here’s the details:
The ruling by Chancellor Kathaleen St. Jude McCormick comes more than five years after a shareholder lawsuit targeted Tesla CEO Musk and directors of the company. They were accused of breaching their duties to the maker of electric vehicles and solar panels, resulting in a waste of corporate assets and unjust enrichment for Musk.
The shareholder’s lawyers argued that the compensation package should be voided because it was dictated by Musk and was the product of sham negotiations with directors who were not independent of him. They also said it was approved by shareholders who were given misleading and incomplete disclosures in a proxy statement.
Defense attorneys countered that the pay plan was fairly negotiated by a compensation committee whose members were independent, contained performance milestones so lofty that they were ridiculed by some Wall Street investors, and blessed by a shareholder vote that was not even required under Delaware law. They also argued that Musk was not a controlling shareholder because he owned less than one-third of the company at the time.
An attorney for Musk and other Tesla defendants did not immediately respond to an email seeking comment.
But Elon Musk being Elon Musk reacted on Twitter:
Then he posted a poll:
Then he threw some shade on the state of Delaware:
I can only conclude that he’s not happy with this ruling. Likely because he needs the cash to float the operations of Twitter which he’s driven into the ground, and as a result is bleeding money. But that’s just a guess. Back to the ruling. Here’s the specifics of why Elon got smacked down:
McCormick determined, however, that because Musk was a controlling shareholder with a potential conflict of interest, the pay package must be subject to a more rigorous standard.
“The process leading to the approval of Musk’s compensation plan was deeply flawed,” McCormick wrote in the colorfully written 200-page decision. “Musk had extensive ties with the persons tasked with negotiating on Tesla’s behalf.”
McCormick specifically cited Musk’s long business and personal relationships with compensation committee chairman Ira Ehrenpreis and fellow committee member Antonio Gracias. She also noted that the working group working on the pay package included general counsel Todd Maron who was Musk’s former divorce attorney.
“In fact, Maron was a primary go-between Musk and the committee, and it is unclear on whose side Maron viewed himself,” the judge wrote. “Yet many of the documents cited by the defendants as proof of a fair process were drafted by Maron.”
McCormick concluded that the only suitable remedy was for Musk’s compensation package to be rescinded. “In the final analysis, Musk launched a self-driving process, recalibrating the speed and direction along the way as he saw fit,” she wrote. “The process arrived at an unfair price. And through this litigation, the plaintiff requests a recall.”
I am not a lawyer, but this sort of ruling doesn’t happen every day. Thus this must be so far outside the bounds of what is considered reasonable that the judge really had no choice but to deliver a ruling like this. Which sucks if you’re Elon as his bank account is one of the things that validates him as human being.
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This entry was posted on January 31, 2024 at 8:51 am and is filed under Commentary with tags Tesla. You can follow any responses to this entry through the RSS 2.0 feed.
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Judge To Elon Musk: You Can’t Get Paid $55 Billion To Be CEO Of Tesla
A judge in Delaware just delivered a hard kick to Elon Musk’s ego yesterday by ruling that his compensation scheme at Tesla that should have delivered him $55 billon cannot stand. Here’s the details:
The ruling by Chancellor Kathaleen St. Jude McCormick comes more than five years after a shareholder lawsuit targeted Tesla CEO Musk and directors of the company. They were accused of breaching their duties to the maker of electric vehicles and solar panels, resulting in a waste of corporate assets and unjust enrichment for Musk.
The shareholder’s lawyers argued that the compensation package should be voided because it was dictated by Musk and was the product of sham negotiations with directors who were not independent of him. They also said it was approved by shareholders who were given misleading and incomplete disclosures in a proxy statement.
Defense attorneys countered that the pay plan was fairly negotiated by a compensation committee whose members were independent, contained performance milestones so lofty that they were ridiculed by some Wall Street investors, and blessed by a shareholder vote that was not even required under Delaware law. They also argued that Musk was not a controlling shareholder because he owned less than one-third of the company at the time.
An attorney for Musk and other Tesla defendants did not immediately respond to an email seeking comment.
But Elon Musk being Elon Musk reacted on Twitter:
Then he posted a poll:
Then he threw some shade on the state of Delaware:
I can only conclude that he’s not happy with this ruling. Likely because he needs the cash to float the operations of Twitter which he’s driven into the ground, and as a result is bleeding money. But that’s just a guess. Back to the ruling. Here’s the specifics of why Elon got smacked down:
McCormick determined, however, that because Musk was a controlling shareholder with a potential conflict of interest, the pay package must be subject to a more rigorous standard.
“The process leading to the approval of Musk’s compensation plan was deeply flawed,” McCormick wrote in the colorfully written 200-page decision. “Musk had extensive ties with the persons tasked with negotiating on Tesla’s behalf.”
McCormick specifically cited Musk’s long business and personal relationships with compensation committee chairman Ira Ehrenpreis and fellow committee member Antonio Gracias. She also noted that the working group working on the pay package included general counsel Todd Maron who was Musk’s former divorce attorney.
“In fact, Maron was a primary go-between Musk and the committee, and it is unclear on whose side Maron viewed himself,” the judge wrote. “Yet many of the documents cited by the defendants as proof of a fair process were drafted by Maron.”
McCormick concluded that the only suitable remedy was for Musk’s compensation package to be rescinded. “In the final analysis, Musk launched a self-driving process, recalibrating the speed and direction along the way as he saw fit,” she wrote. “The process arrived at an unfair price. And through this litigation, the plaintiff requests a recall.”
I am not a lawyer, but this sort of ruling doesn’t happen every day. Thus this must be so far outside the bounds of what is considered reasonable that the judge really had no choice but to deliver a ruling like this. Which sucks if you’re Elon as his bank account is one of the things that validates him as human being.
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This entry was posted on January 31, 2024 at 8:51 am and is filed under Commentary with tags Tesla. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.