A Delaware judge ruled this Tuesday in favor of the small investor who challenged the payment of $55 billion that Elon Musk was awarded as head of Tesla.
The plaintiff, owner of nine shares of the electric vehicle manufacturer, denounced the firm in 2018 for “excessive and unjustified enrichment” of which he would later also own Twitter (currently X) and for considering that the members of the board of directors did not act independently by improperly allowing him to decide the details of the compensation plan as he wishes.
The tycoon assured before the court in November 2022 that he did not play any role in settling the amount of the remuneration and stated that when he assumed management his only objective was to make a pioneering company in the automotive sector viable. sustainable.
Judge Kathaleen St. J. McCormick's ruling comes more than five years after the electric car maker's co-founder received the largest executive compensation plan in history.
Tesla's board of directors will have to present a new proposal, to whose formulation Richard Tornetta, the small shareholder, is invited by court decision.
The ruling can be appealed to the Delaware Supreme Court.
Tesla shares fell 2.8% in after-market trading.
The verdict leaves the future of Musk's fortune in limbo.
Valued at about $51.1 billion, the options were one of his most valuable assets.
Without them, his net worth would drop to $154.3 billion, making him the third-richest person in the world after spending most of the past two years in the No. 1 spot, according to the Billionaires Index. Bloomberg.
Stock options in his compensation plan have accrued in increments over the past few years as performance goals have been met, but he has not yet exercised any of the options, regulatory filings show .
During the week-long trial, officials at Tesla, the world's most valuable car company, argued that the company was paying to ensure that one of the world's most dynamic entrepreneurs would continue to devote his attention to the electric vehicle maker, given its multiplicity of business interests and the risk of diversion of their endeavor.
Antonio Gracias, director of Tesla from 2007 to 2021, called the package a “great deal for shareholders” because, he said, it led to the company's extraordinary success, called into question by the accidents of some of its models.
Dissatisfied with the explanation, Tornetta, the small shareholder, considered the payment received by Musk excessive, who claims to have never discussed it with the board of directors and even less dictated or imposed the terms of the agreement.
However, case documentation shows that the businessman was asked in a text by his friend Ira Ehrenpreis, a Tesla board member, on April 8, 2017, about how to gauge his future compensation.
Musk responded that he should end up “owning 10% of the company” in a compensation plan built around a progression of objectives that would gradually grant him 1% of the outstanding shares.
Musk later commented to one of the co-founders in an email that he was “planning something really crazy, but also high risk.”
Musk has competed several times with French luxury czar Bernard Arnault for the title of richest man in the world.
If the Delaware judge's sentence is confirmed, he will have to settle for being a second in the billionaires' club.
The Delaware ruling invalidating the payment plan is the billionaire's second defeat in court, after failing to persuade an appeals court last May to release him from a 2018 settlement with the Securities and Exchange Commission. of the United States (SEC, in its English acronym; the stock market regulator) and being able to tweet about Tesla without permission from his lawyer.
Musk, who prides himself on disregarding corporate rules, has nevertheless emerged victorious from other court battles.
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