A court invalidated a salary compensation of more than USD 55 billion by Tesla to Elon Musk

This decision represents a possible financial setback for Musk, who is recognized as the richest man in the world. (REUTERS/Lukasz Glowala)

A judge of Delaware this Tuesday, January 30, annulled the massive compensation package for Elon Musk valued at 55.8 billion dollars by tesla. This ruling, which is subject to appeal, could mean a considerable blow to the fortune of the technology billionaire who is the richest man in the world according to Forbeswhich estimates his net worth at $210.6 billion.

The judge Kathaleen McCormickwho presides over the Court of Chancery of Delawarecriticized the way the compensation plan approval process was carried out, describing it as “deeply flawed”. McCormick noted the extensive connections between Musk and the negotiators of the agreement, calling into question the independence and transparency of the process.

As published The Wall Street Journalthis court ruling implies that the council of tesla must prepare a new compensation proposal for Muskand comes from the argument of Richard Tornettaa shareholder of the electric car company, who pointed out that the company’s board of directors breached its fiduciary duties by granting the tycoon a performance-based plan, described in the document as “the largest potential compensation opportunity ever seen in public markets”.

Musk expressed his discontent with the decision through X. There he recommended not incorporating companies in Delaware, a state known for its pro-corporate policies. (X/elonmusk)

Elon Muskknown for its multiple technological ventures and for being the largest shareholder of tesla With a 13% stake, it has sought to strengthen its control over the firm. This desire became evident when, after the recent acquisition of Twitter -now x-, expressed his intention to increase his participation in tesla to transform it into a leader in artificial intelligence and robotics.

The controversy originated in 2018, when the shareholder Richard Tornetta challenged the validity of the compensation package Musk before the commercial law court of Delawarearguing an apparent manipulation of the approval process and misleading communication to investors.

During the process, it was highlighted that Musk He had not yet exercised any of his vested stock options, denying that he had imposed the terms of his compensation. This scenario is not foreign to Muskwho, according to The Associated Press, faced similar trials in Delaware regarding the acquisition of SolarCity by teslaquestioning his influence on the board of directors.

The court ruling means that Tesla will have to design a new compensation proposal for Musk. (REUTERS/Stephen Lam)

The compensation agreement Musksponsored by the board of directors of tesla In 2017, it was characterized by its non-monetary structure, consisting of twelve tranches of stock options, subject to the fulfillment of certain operational and market valuation milestones. So that Musk To benefit, the electric car company, which at the time was valued at less than $60 billion and was suffering from financial losses, had to reach a minimum market capitalization of $650 billion, in addition to meeting several revenue and profit targets. .

According to Ira Ehrenpreisboard member and compensation committee chair, this structure sought “keep him engaged” with teslawhich managed to overcome the last of these challenges in 2022.

After the ruling, the actions of the company They experienced a decline of 3.6% after the market closed this Tuesday. In reaction to the failure, Musk He criticized the decision through a tweet in which he wrote: “Never incorporate your company in the state of Delaware”a preferred location for many companies due to its tax advantages, pro-corporate laws and privacy policies.

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