The $56 billion salary package prepared for Tesla CEO Elon Musk and approved in 2018 was once again canceled by the Delaware Chancery Court. Judge Kathaleen St. J. McCormick confirmed its previous decision to cancel on the grounds that there were conflicts of interest in the approval process of this compensation plan.
In June, Tesla shareholders voted to reapprove Musk’s salary package. However, Judge McCormick stated that this approval of the shareholders would not change the court decision. In his decision, he stated, “There is no procedural basis to change the outcome of a negative decision based on evidence generated after the case.” He also called claims that shareholders could change court decisions “generally dubious and in this case absolutely false.”
Judge McCormick stated that Tesla’s board did not have the authority to adjust Musk’s pay package. He also highlighted that there were multiple false statements in the company’s proxy statements to shareholders. Therefore, the shareholders’ approval was not sufficient to override the court decision, he said.
The court also ordered a payment of $345 million to the lawyers representing Tesla shareholders due to this case. Musk is expected to object to this decision and appeal.
What will Tesla and Elon Musk do?
After this decision, it is a matter of curiosity what path Tesla and Elon Musk will follow. Experts state that the company’s board of directors may prepare a new salary package for Musk, but this may lead to discussions among shareholders. On the other hand, Musk’s appeal process could also have a decisive impact on the company’s future.
In light of these developments, Tesla’s financial performance and shareholder relations will continue to be closely monitored. Musk’s leadership and the company’s strategic decisions contain uncertainties about how they will be affected by this process.
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