Business
US Judge Dismisses Elon Musks Salary, Asking "Was the Worlds Richest Person Overpaid?"
By - 31 Jan 2024 10:26 AM
A Delaware judge asked a straightforward question at the outset of her legal opinion, rejecting Elon Musk's $55 billion Tesla pay deal: "Was the richest person in the world overpaid?"
Her response was unambiguous after nearly a year of thought and 200 pages of legal justification: yes. Indeed, he was.
Chief Judge Kathaleen St. J. McCormick of the Chancery Court agreed with a Tesla investor on Tuesday. The investor had argued that Musk's 2018 pay package did not clearly outline his requirements for earning the money and that the board was riddled with conflicts of interest when it approved the agreement to keep Musk as CEO. Musk has been the richest person in the world for the last two years, but the decision could push him down to third place. The judge's ruling also coincides with Musk's recent statements to analysts that he wants to increase his ownership of the electric vehicle manufacturer in order to keep control of the business, prevent removal, and pursue further advancements in artificial intelligence.
The judge's landmark ruling can be distilled into the following points:However, McCormick pointed out, "Musk does not linger in the traditional comforts of everyday billionaires. For instance, he just has one house." She then referred to his deposition, in which he stated, "I attempted to list it on Airbnb, but Hillsborough has banned Airbnb." They are really stiff."
Board Members in Conflict
Given that the board members on the compensation committee tasked with negotiating on the company's behalf were "beholden" to the CEO, the judge deemed Tesla's process of approving the pay package to be "deeply flawed". The judge stated that those people included former General Counsel Todd Maron, who had represented Musk during his divorce; Antonio Gracias, who had been Musk's friend for twenty years and frequently accompanied him on vacations; and Ira Ehrenpreis, the chair of the compensation committee, who had known Musk for fifteen years."It is unsurprising that there was no meaningful negotiation over any of the terms of the plan," said McCormick. The judge declared, "They did not take a position 'on the other side' of Musk." "It was a joint endeavor. Negotiations based on positions were absent. Up until he unilaterally dropped his request six months later, Musk provided the terms that the board and compensation committee took into consideration when determining the size and structure of the grant. Musk didn't appear to give a damn about the other information. They were resolved."
