(New York) The judge of a court in the state of Delaware, in the eastern United States, ruled in favor of a shareholder of the automobile manufacturer Tesla who requested the cancellation of a compensation plan granted in 2018 to boss Elon Musk, estimated at $56 billion.
“The judgment is in favor of the plaintiff,” concluded Judge Kathaleen McCormick in her 200-page decision published Tuesday. “The complainant is entitled to have an annulment,” she ruled.
It specifies that the parties must now “discuss among themselves to establish a final decision intended to implement this judgment” and “to put an end to this matter at the trial level”.
“Was the richest man in the world overpaid?” “, begins the judge’s decision, emphasizing that the plan represented 250 times the average remuneration of Elon Musk’s peers.
The one she nicknamed the “Superstar CEO” held 21.9% of Tesla’s capital at the time but was the one who really had control, according to the document.
The judge considers that the shareholders received “erroneous” and “misleading” information about the board of directors and the remuneration committee – several members of which had been close to the billionaire for 15 to 20 years – ahead of the meeting general meeting during which the plan was approved.
The billionaire posted on the social network X, which he owns: “Never locate your company headquarters in the state of Delaware.”
Around 7:30 p.m. on Wednesday, Tesla shares lost 2.89% in electronic trading after the close of the New York Stock Exchange.
The law firm representing the main plaintiff, Richard Tornetta, and other shareholders, was delighted in a statement sent to AFP to have won an “emblematic” case on remuneration.
The judge “determined that Tesla’s board of directors failed in its fiduciary duty by structuring compensation in increments of[Elon] Musk and, therefore, she ordered that the entire package be canceled,” noted the firm Bernstein, Litowitz, Berger & Grossman.
“Gargantuan”
“We are extremely grateful for the court’s careful and extremely well-reasoned decision to overturn Tesla’s ridiculously oversized compensation plan,” commented Greg Varallo, one of the plaintiffs’ lead attorneys, quoted in the firm’s statement.
This will be done “for the benefit of Tesla investors, who will see the dilution generated by this gargantuan plan be erased,” he continued.
Asked by AFP, Elon Musk’s lawyer did not react immediately.
Hearings took place in November 2022, during which Elon Musk defended this enormous compensation plan.
“The probability of survival [du groupe] was extremely low,” the multi-entrepreneur then recalled, ensuring that the manufacturer was very close to bankruptcy in 2018.
Elon Musk was sued, alongside Tesla and certain members of the board of directors, by a shareholder who accused them of having unduly authorized in 2018 “the largest compensation plan ever awarded to an executive”.
This plan included giving Mr. Musk Tesla shares based on the achievement of several objectives over ten years. It was estimated at $56 billion when it was adopted.
According to the complainant, the businessman dictated his terms to directors who, given their relationships with him or their personal interests, were not sufficiently independent to oppose them.
And this even though he did not work full time for Tesla as he was also at the head of the space company SpaceX and the startups Neuralink and The Boring Company. He also bought the social network Twitter, which he renamed X.
The trial, which lasted five days, was held without a jury.
Elon Musk had assured that he had not participated in the development of the plan, although documents shown in court suggested that he had discussed it with members of the board of directors and with executives.