Incredible ambitions, enormous achievements, but also highly controversial opinions, flirtation with mind-expanding drugs and greed – Elon Musk For a long time it seemed to know no boundaries. Then a shareholder started his «Rip-off initiative» of a special kind and complained about the “excessive remuneration”. Now the judge came Kathleen McCormick from the American state of Delaware after much consideration to a clear verdict.
$55 billion package voided
There, of all places, where the tax haven is flourishing, it declared Elon Musk’s salary package worth around $55 billion agreed with the electric car manufacturer Tesla in 2018 void. She is siding with a shareholder who filed a lawsuit against Musk and Tesla because he considers the eccentric’s remuneration to be excessive.
Musk can appeal the verdict. However, if the decision is upheld, Tesla’s board of directors would have to put together a new salary package for him. And that just a short time after he had made people sit up and take notice with his demand for another generous salary package. He even threatened to develop products elsewhere in the future if he did not receive at least 25 percent of the voting rights.
He claimed that it wasn’t about the money for him. He just wants to ensure that he has enough influence so that he cannot be so easily disempowered by institutional investors with “strange ideas”. Skeptics, on the other hand, argue that even after selling shares worth about $20 billion in 2022 to refinance the takeover of Twitter, he is worried about one Disempowerment due to drug use as well as about the course of business.
Elon made billions selling Tesla shares in 2022.
Musk’s salary package was very unusual. After the early years, he received neither a basic salary nor bonus payments, but instead was granted stock purchase options. These were and are tied to the achievement of certain operational goals, but they were extremely lucrative. In this way he was able to buy Tesla shares cheaply and became extremely rich because the price went through the roof at times, because the car manufacturer grew enormously, because the shareholders were enthusiastic about it and because the counterparts in the option transactions stocked up on the shares when prices rose had to.
Tesla’s stock market value was $60 billion when the pay package was decided. In the years that followed, it rose to more than a trillion dollars at times. Today it is still around 600 billion dollars, which still makes Tesla by far the most valuable, but also expensive, car manufacturer in the world.
Salary package: “historically unprecedented” and “unfair”
The shareholder lawsuit was heard in court in the fall of 2022 in the presence of Musk. Afterwards took himself Judge McCormick a lot of time for that 201 page judgment, in which she describes Musk’s pay package as “historically unprecedented” and “unfair.” The procedure that led to the granting of the compensation package was “deeply flawed”. Among other things, because of the close personal connections to other members of the board of directors who were responsible for negotiating his remuneration.
Elon Musk exercised the “maximum influence” that a manager could have over a company, and the board of directors never asked themselves whether such lavish pay was necessary to keep him. The judge speculated that the panel was “perhaps blinded by Musk’s superstar behavior.” The company’s eight-member executive board includes several close friends of Musk and his brother Kimbal. Many owed a large part of their personal wealth to them.
If the ruling stands and Musk’s compensation plan is canceled, he would lose purchase options on 303 million Tesla shares, which would be almost ten percent of the company. In this way, not only would his share fall to around 13 percent, well below the targeted 25 percent, but his position as the richest person in the world would also be at risk. In the eyes of critics, the ruling is “an incredibly important decision because it establishes that there is such a thing as outrageous compensation,” Sarah Anderson of the Institute for Policy Studies, a progressive research group, told the New York Times. And the discussions about the rip-off initiative in Switzerland would be put into perspective.
Subject-related interests of the author
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