The judge sided with Elon Musk, stating that on what Musk needed to do to earn the money . Also conflicts of interest within the board. In the legal opinion addressing Elon Musk’s $55 billion Tesla pay deal. Delaware Judge Kathaleen St. J. McCormick began by questioning if the richest person in the world was overpaid. After a year’s examination, she concluded that indeed he was.
The ruling puts Musk at risk of dropping to the third-richest person globally. After Musk expressed his desire to increase his stake in Tesla to maintain control and expand into artificial intelligence.
Enormous Payday:
The judge described the pay plan as the largest ever observed in public markets, vastly exceeding those of Musk’s CEO peers. It was deemed “unfathomable,” “historically unprecedented,” and “incredible.” The judge criticized Tesla’s flawed process for approving the pay package, highlighting that board members were too aligned with Musk, lacking independence. The compensation committee members had personal ties to Musk, impairing their ability to negotiate effectively.
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Funding Mars Trips:
Musk planned to use options from the 2018 package to fund his ambitions for Mars colonization through SpaceX. Considering it a moral obligation to direct his wealth toward that goal. The judge criticized Tesla’s lawyers for failing to explain why such an extravagant plan was necessary to motivate Musk when his ownership stake was already substantial. The board did not critically assess the need for the plan.
Superstar CEO’s Control:
The judge assessed whether Musk truly controlled Tesla, pointing out his significant equity stake, his role as a “Superstar CEO,” and close ties with those negotiating on Tesla’s behalf. She concluded that, at least for this transaction, Musk did control Tesla, deeming the process deeply flawed. The judge acknowledged the difficulty of Musk’s legal team in proving the fairness of the largest potential compensation plan in public markets history, despite their talent. In the end, the judge likened Musk’s pay package to a flawed car design, stating that Musk had launched a self-driving process, adjusting speed and direction as he saw fit, leading to an unfair outcome. She granted the investor’s request for rescission, likening it to a recall of a defective product.
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