A Delaware judge once again struck down a compensation plan for Tesla Inc. (NASDAQ:TSLA) CEO Elon Musk from 2018 on Monday, six months after Tesla shareholders approved the $56 billion pay package for a second time.
The Timeline: Delaware Chancery Court Judge Kathaleen McCormick ruled in January that the pay package would be voided due to Tesla’s board being influenced by Musk when they adopted the plan. Tesla shareholders voted again to reinstate the package in June.
However, McCormick again ruled against the package on Monday. Tesla said in a post on X that the company deems the ruling to be wrong and intends to appeal to the Delaware Supreme Court while adding that the judge overruled a supermajority of shareholders. However, appealing could typically take around a year.
What Next: Tesla board chair Robyn Denholm said in June prior to shareholders voting for the pay package yet again that there are multiple possibilities if the package gets rejected. The board then considered creating a new pay plan but the decision would cost shareholders more or result in decreased motivation for the company CEO, Denholm then said, as reported by Business Insider.
Ratifying a new plan could cost the EV giant’s shareholders an additional $25 billion in the form of stock-based compensation, according to Denholm.
The 2018 pay package awarded Musk stock options if the company hit certain performance and financial targets. Musk cleared all targets, giving the award a hefty value. While the package was originally valued at up to $56 billion, it is now worth over $100 billion given the stock’s recent rally following Trump’s re-election to the white house, as per Reuters.
According to Tesla, formulating a new pay package or offering Musk the old one could both be costly. While a settlement is possible in the lawsuit, it is unlikely given Musk’s previous track record of taking cases to trial.
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