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San Francisco, January 31
A US judge has ruled that Elon Musk's $56 billion pay package is unfair and the Tesla board will need to come up with a new pay proposal.
The decision, issued in the Delaware Court of Chancery by Judge Kathaleen McCormick, means that Musk can't keep the 2018 compensation package. In her ruling, McCormick wrote that Tesla “bore the burden of proving that the compensation plan was fair, and they failed to meet their burden.”
“Never incorporate your company in the state of Delaware,” Musk posted on X after the ruling.
He later posted a poll asking whether Tesla should change its state of incorporation to Texas. “Should Tesla change its state of incorporation to Texas, home of its physical headquarters?” according to the poll.
The compensation plan approved by shareholders in 2018 consisted of 20.3 million stock option awards broken up into 12 tranches of 1.69 million shares.
Under the agreement, the options vested in 12 increments if Tesla hit specific milestones on market cap, revenue and adjusted earnings (excluding certain one-time charges such as stock compensation).
In her ruling, McCormick described the process leading to the approval of Musk's compensation plan as “deeply flawed”.
“The process for coming up with Elon's comp plan wasn't independent because Elon controlled the Board and the directors who approved the plan weren't truly independent. Further, the shareholders who approved the comp plan weren't made aware of this controlled relationship. Hence, the $55.8 billion comp plan is voided,” she wrote.
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