A judge has just ruled in favor of a small shareholder by canceling the 2018 compensation plan of the Tesla boss. This decision could cost Elon Musk no less than $56 billion.
By holding only nine Tesla shares, Richard Tornetta has just cost Elon Musk dearly. This shareholder launched a procedure contesting the record compensation plan validated in 2018 by the Tesla board of directors. Judge Kathaleen McCormick, presiding over the case, rendered a verdict on January 30 going in the direction of the complainant. This decision means that Tesla will have to propose an alternative compensation package for Elon Musk or appeal the decision.
The consequences for Elon Musk may not be limited to the 56 billion income invalidated by the court decision. The entire Tesla board of directors also finds itself in the hot seat because of the obvious complacency towards Elon Musk. A lack of independence which could lead, according to Reutersthe appointment of new members, less accommodating to the wishes of the company manager.
A board of directors without control over Elon Musk
In delivering her verdict, the judge said: “ Neither the compensation committee nor the board acted in the best interests of the company when negotiating Mr. Musk’s compensation plan. In fact, there is virtually no evidence of negotiations. »
Tesla’s board of directors is expected to vote on the compensation plan independently and according to high performance criteria. However, on these two elements, the evidence provided shows that it was under the influence of Elon Musk that all this was decided, including the objectives to be achieved. These ultimately only corresponded to the company’s roadmap, with no other major challenges than to succeed in the production and democratization of Teslas with the Model 3, then the Model Y.
Tesla Gigafactory // Source : Tesla
According to ReutersJudge McCormik went even further by describing the board members and executives as advisors to Elon Musk.
Elon Musk annoyed by this snub
Elon Musk seems to have the verdict stuck in his throat. Right after the announcement, the businessman published on this January 30: “ Never incorporate your business in the State of Delaware “. It is a reaction to the fact of having been mishandled by a judge of this jurisdiction who took to heart this case launched by a small holder of action.
It must be said that seeing several tens of billions of dollars at risk of disappearing because of a shareholder who held a few hundred euros of Tesla shares, Thrash Metal drummer and small entrepreneur, that must not really be very pleasant. for one of the richest men in the world. Especially since it is common knowledge that Elon Musk doesn’t really like to see his plans thwarted.
However, the Tesla boss has other alternatives to this extremely generous compensation plan. Elon Musk can also appeal the court decision to hope for a more lenient judgment.
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