Elon Musk’s 2018 compensation deal is currently being investigated in a Delaware court.
Fox Business reports that attorneys for a Tesla shareholder sought the judge to throw out a 2018 remuneration plan that the company’s board of directors may have approved that may be worth more than $55 billion on Tuesday.
Per the report, the latest arguments come after a trial in November when Musk denied dictating the parameters of the terms or showing up to any sessions where the board, its compensation committee, or a working group that helped develop it.
The lawyers for the shareholders argue that the compensation package should be null since it was dictated by Musk and the result of sham negotiations with directors who were not independent of him.
They further claim that shareholders approved it after being given false and incomplete disclosures in a proxy statement.
They further claim that shareholders approved it after being given false and incomplete disclosures in a proxy statement.
Without a finding of wrongdoing, Delaware courts frequently defer to the “business judgment” of corporation directors in decision-making.
Because Musk was a dominant shareholder, attorney Greg Varallo argued that the Tesla defendants should be forced to demonstrate that the compensation plan was “fully fair” to owners.
Varallo informed Chancellor Kathaleen St. Jude McCormick that Musk should be required to return some, if not all, of his stock option grants.
McCormick is the same judge who ordered Musk to pay $44 billion for Twitter after he tried to back out of his commitment to buy the social media platform.
Defense counsel said that the pay plan was honestly negotiated by an independent compensation committee, included performance objectives so aspirational that some Wall Street investors mocked it, and was approved by a shareholder vote that was not even necessary under Delaware law.
Musk, who held around 22% of Tesla at the time the proposal was authorized, would receive stock equivalent to 1% of outstanding shares at the time of the grant. If the business’s market valuation increased by $600 billion, his stake in the company would rise to around 28%.
News Source: Fox Business
