Shareholder seeks to invalidate Elon Musk's USD55B compensation package at Tesla
Date
2/22/2023 3:13:44 AM
(MENAFN) Attorneys representing a Tesla shareholder have requested a Delaware judge to invalidate a compensation package given to CEO Elon Musk in 2018 that could potentially be worth over USD55 billion. The shareholder's legal team argues that the compensation package should be annulled because it was influenced by Musk and the result of fake negotiations with directors who were not impartial to him. They further claimed that it was authorized by shareholders who were given incomplete disclosures and misleading information in a proxy statement.
Corporate directors' "business judgment" is typically honored by Delaware courts in decision-making unless there is evidence of wrongdoing. However, attorney Greg Varallo argued that the Tesla defendants must demonstrate that the compensation plan was "completely equitable" to stockholders since Musk was a controlling shareholder.
Defense lawyers argued that the compensation committee, which was made up of independent members, fairly negotiated the pay plan, which included ambitious performance milestones that were ridiculed by some Wall Street investors. Furthermore, it was approved by a shareholder vote that was not required under Delaware law. They also stated that Musk was not a controlling shareholder because he owned less than one-third of the company at the time.
Following a November trial, in which Musk denied dictating terms of the compensation package or attending any meetings at which the plan was discussed by the board, its compensation committee, or a working group that helped develop it, the recent arguments took place on Tuesday. The judge's ruling on this matter is still pending.
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