A Delaware judge rejected the second time from the CEO of Tesla, the director general of Tesla, Elon Musk, writing in his opinion this week that the company's approval process for the package was “deeply imperfect”.
Tesla shareholders approved the remuneration plan in 2018, which was once estimated at $ 56 billion but fluctuates considerably with Tesla's action. Chancellor Kathaleen McCormick first rejected the plan earlier this year on the grounds that Musk had an unfair influence on shareholders and that negotiation negotiations were not legitimate.
McCormick again rejected the plan this week, citing similar reasons, although Musk's lawyers have argued that the disproportionate remuneration plan is justified because it is directly linked to the evaluation of Tesla, which is currently at more than 1 dollars.
Dominant player on the electric vehicle market, Tesla a Reversal This year among the increased problems of competition and security surrounding Complete autonomous mode. The company has reduced more than 10% of its global workforce in April, citing the need to reduce costs.
Musk was used last month to lead the new Ministry of Effectiveness of the Government of the President elected Donald Trump, a role that could strengthen his influence and Tesla's position.
How did we get here?
Tesla's shareholder, Richard Tornetta, filed a complaint against Musk and the company in 2018 after the majority of shareholders approved a 10 -year yield package for Musk.
Tornetta alleged that Musk had misleaded investors who approved the plan and exerted an inappropriate influence on negotiations. Musk denied allegations at the trial, saying that he had not checked the terms of the remuneration package or attended the meetings where it was discussed.
McCormick rose to the Tornetta side in January and blocked the plan. After the decision, Tesla shareholders voted again to approve the pay package, with more than 70% in favor, but it is not enough to change the spirit of McCormick.
Why did the judge reigned twice?
After McCormick's first decision, Musk's lawyers argued that the overwhelming support for shareholders of his remuneration plan should prevail over the court's decision. Tesla shareholders voted twice to approve the plan, but McCormick argued that they did not act independently.
“There was undoubtedly a range of healthy amounts that the board of directors could have decided to pay Musk,” wrote McCormick in his second opinion. Instead, the board of directors “capitulated Musk's conditions and has not proven that these terms were entirely fair,” she said.
McCormick said he was not standard for a judge to modify a decision according to the shareholders' vote. There was “no procedural ground” to overthrow the decision, she wrote.
How is Musk's remuneration compared?
If it is approved, the Musk's remuneration plan would be the most important in the history of the United States for a leader of a public company, According to CNBC. The remuneration plan includes a series of 12 milestones and would attribute additional Tesla actions to Musk as the company develops.
For Musk to reach each milestone, Tesla's market capitalization must increase by an increase of $ 50 billion. For Musk to be fully acquired in the price, the company's market capitalization must reach $ 650 billion, said the company.
Musk lawyers argue that the remuneration plan is a reflection of what the executive are worth, but McCormick does not agree. In his second decision, the judge also granted the complainants $ 345 million in legal fees, although applicants' lawyers asked for $ 5.6 billion.
Who is right?
The expert in corporate governance, Charles Elson, said that the decision of the Delaware Court was solid and in accordance with the law because Musk had violated the regulation of conflicts of interest. Tesla also created new inappropriate evidence after McCormick's first decision by calling for a second vote of shareholders, he said.
“The judge noted that the council was not independent of Musk and that there was no negotiation between him and the board of directors which produced this package, which makes him suspect,” said Elson. “Standard rules must apply.”
What will Musk do now?
Musk criticized McCormick's decision on X, the social media He owns, writing that “shareholders should control the votes of the company, not the judges”.
Tesla also posted on X that the court's decision was wrong and that the company plans to appeal. The appeal would be filed with the Supreme Court of Delaware.
“This decision, if it is not canceled, means that the complainants' judges and lawyers direct the companies in Delaware rather than their legitimate owners”, ” The company wrote.
Tornetta's lawyers and other shareholders opposing the Musk's remuneration plan said they would defend the court's decision if the decision was on appeal.
The Associated Press contributed to this report.
