Delaware judge control On Tuesday, Tesla CEO Elon Musk announced that the company must abandon a 2018 bonus agreement that could be worth up to $55.8 billion after determining that it was not fairly negotiated. did.
A group of Tesla shareholders sued Musk and the company after the company announced a bonus package that would give him 1% of the company’s stock for each of 12 stock price and earnings milestones stipulated in the contract.
If all milestones are met, the bonus could increase his control over the company from 21% to 28%, which it ultimately did.
Shareholders argued that the bonuses were large because Musk effectively controlled the board of directors, which gave them to him. The defendants described the transaction as “high risk, high reward.”
Treasury Judge Catherine McCormick wrote that the bonus award was the largest in U.S. private company history, more than 250 times the median executive compensation at the time.
McCormick said Musk has “tremendous influence” over the company’s board of directors and his position as “superstar CEO.” He added that the shareholder vote approving the bonus was also unreliable because the company misinformed shareholders.
The judge said the process for creating the bonus contracts was “deeply flawed” because of extensive and close relationships with several board members who created the bonus contracts, and that the process paid an “unreasonable price.” He added that it has become.
She decided that the bonus contract should be cancelled.
Business analysts speculate that the ruling could cause Musk to lose his title as the world’s richest person.his net worth is estimated in advance According to Forbes, its size is estimated to be around $210 billion.
Tesla shares fell about 5% after hours on the news. The ruling compounded the company’s troubles stemming from concerns about vehicle safety, particularly its self-driving software.
Shortly after the verdict was announced on Tuesday, Musk chastised Courtroom of X (formerly Twitter).
“Never set up a company in Delaware,” he said.
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