Shareholder Wants Court To Ax Musk's Tesla Pay Package

Attorneys for a Tesla shareholder urged a Delaware judge to invalidate a 2018 compensation package awarded by the company’s board of directors to CEO Elon Musk that is potentially worth more than $55 billion, Randall Chase reported for the Associated Press (AP).

Photo Insert: Tesla shareholders signing a ceremonial vehicle during its 2022 shareholder's meeting.

The shareholder’s lawyers argue that the compensation package should be voided because it was dictated by Musk and the product of sham negotiations with directors who were not independent of him.

They also say it was approved by shareholders who were given misleading and incomplete disclosures in a proxy statement.

Delaware courts often defer to the “business judgment” of corporate directors in decision-making absent a showing of wrongdoing.

But attorney Greg Varallo argued that the Tesla defendants should be required to show that the compensation plan was “entirely fair” to stockholders because Musk was a controlling shareholder.

Defense attorneys countered that the pay plan was fairly negotiated by a compensation committee whose members were independent, contained performance milestones that were so lofty they were ridiculed by some Wall Street investors, and blessed by a shareholder vote that was not even required under Delaware law.

They also argue that Musk was not a controlling shareholder because he owned less than one-third of the company at the time.

WEEKLY FEATURE : MVP Group Keeps Lights On During Pandemic