DAILY BEAST
A Delaware judge nullified Elon Musk’s whopping $56 billion pay package at Tesla in January, writing that the board had improperly granted him an “unfathomable sum” of money. But Musk still wants that cash. Now he is hoping Tesla shareholders will sign off on the payday, even as the company suffers from a sagging stock price.
The pay package, enacted in 2018, granted Musk 12 percent of the company’s stock over 12 separate vesting tranches. The first tranche executed when the company hit a market value of $100 billion, while the last kicked in at $650 billion. Other revenue and profitability milestones were included in the calculations as well.
Tesla is currently worth $490 million; its stock has fallen close to 40 percent over the past six months.
According to a corporate filing on Wednesday, shareholders will be asked to vote on the issue at an annual meeting on June 13. Even if shareholders sign off on the plan, though, it’s not clear whether it will survive legal scrutiny. Still, the company argues that Musk deserves the windfall since he wasn’t granted a salary, cash bonus, or other equity during the years the pay package was in effect. The filing also noted that Musk and his brother, Kimbal, both recused themselves from the original board vote, which was then submitted to shareholders in 2018.
After the plan was implemented, a stockholder named Richard Tornetta filed a lawsuit decrying the pay package as absurd. It took six years for his complaint to wind through the court system, but Judge Kathaleen McCormick ultimately decided against the company.
Even with Musk and his brother’s recusals, she found, the board was still unduly influenced by Musk, and many of them owed their financial success to him. She also determined that shareholders were not sufficiently informed when they first signed off on the agreement.
“Never incorporate your company in the state of Delaware,” Musk fumed following her decision. Tesla is now also asking shareholders for permission to reincorporate in Texas, out of reach of the Delaware judges.
