In a remarkable turn of events, a Delaware judge has upheld the decision that Tesla must revoke Elon Musk’s colossal pay package. Chancellor Kathaleen St Jude McCormick made this ruling after denying a request from Musk and Tesla’s corporate directors to overturn her previous judgment. This case revolves around a lawsuit filed by a Tesla shareholder challenging Musk’s 2018 compensation package, which has been a topic of contention due to its unprecedented nature.
Key Points:
– Chancellor McCormick rejected the significant fee request of over US$5 billion by the plaintiff attorneys, determining that a fee award of US$345 million was more appropriate.
– Musk’s engineered pay package initially valued at approximately US$56 billion was brought into question for a lack of independence in the negotiation process with the directors.
– Despite a second round of ratification of Musk’s pay package by Tesla shareholders, Chancellor McCormick stood by her original ruling, highlighting the flaws in the process.
In her 103-page opinion, Judge McCormick dismantled the defence’s arguments that Tesla shareholders supported Musk’s pay package. She emphasized that shareholder votes cannot ratify conflicted transactions, especially considering the misstatements in Tesla’s proxy statements. Musk, in response to the ruling, voiced his disagreement, insisting that shareholders should have the final say in company matters, not judges.
Regarding the extravagant fee request by the shareholder attorneys, Chancellor McCormick deemed the US$5.6 billion ask excessive, reducing it significantly to a more fitting amount of US$345 million. Despite the methodology being sound, she emphasized the need to prevent counsel from receiving windfalls. The fee award of US$345 million was seen as an appropriate sum for a successful outcome, surpassing previous legal fee records.
Conclusion:
The legal battle over Elon Musk’s pay package has been a contentious issue, culminating in Chancellor McCormick’s reaffirmed ruling. The case sheds light on the complexity and implications of executive compensation and legal proceedings, emphasizing the need for transparency and adherence to legal standards in corporate governance.
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