No dough for Elon Musk.
That’s what Delaware state Chancery Court Chancellor Kathaleen McCormick decided when she ruled against Elon Musk and the Tesla board’s 2018 pay package that helped to make Tesla CEO Elon Musk one of the richest people in the world.
In her ruling she said that Musk and the Tesla board “bore the burden of proving that the compensation plan was fair, and they failed to meet their burden.”
And we’re talking about some serious money here!
The Tesla board in 2018 awarded Elon Musk an insane $55.8 billion dollar pay package in a series of 12 tranches of stock options, which totaled 303 million split-adjusted stock options with a sweetheart deal allowing him to exercise those stock options at just $23.34 a share when Tesla’s stock was trading in between an $18-$20 dollar a share range.
Like I said, sweetheart deal!
Now the compensation package has been ruled null and void.
How did Tesla’s board justify awarding Elon Musk this insane compensation package?
They argue that Tesla’s market cap was valued at $54 billion at the time the pay package was approved, but as of today it has risen to $607 billion representing a gain of more than 1,000% in large part thanks to Elon Musk they argue.
How did we get here in the first place?
Well, Elon Musk notoriously only receives $1 a year in salary from Tesla, and instead has opted to receive stock options as his form of compensation.
After the Tesla board awarded Elon Musk the biggest compensation packages in the history of publicly traded companies, a group of shareholders sued arguing that “the package of stock options was excessive and that the directors on Tesla’s board were not truly independent and were too close to Musk to protect shareholders’ interests.” according to an article on CNN.
You see, those 12 separate tranches of stock options really weren’t “stretch performance goals” as the company told shareholders. Attorney’s for the shareholders who sued argued that those “milestones were essentially the same as the company’s internal growth projections that were being shared with banks and rating agencies.”
So what’s next?
I’m guessing the answer is an appeal, followed by more appeals, and will be tied up endlessly in court for years since both Tesla and Elon Musk can afford to fight this for seemingly ever.
Judge strikes down Elon Musk’s massive, multi-billion-dollar pay package