Tesla boss Musk is to part with a salary package potentially worth the equivalent of more than 50 billion euros. This was ordered by a US court. This proved right to a small shareholder who accused Musk of “unjust enrichment”.
Bad news for the richest man in the world: A US court has declared Tesla boss Elon Musk’s billion-dollar salary package from the electric car pioneer invalid.
Judge Kathaleen McCormick ruled in favor of a Tesla shareholder. Musk and Tesla could not show that the compensation agreed in 2018 – a share package with an estimated value of 56 billion dollars (52 billion euros) – was “fair”.
Musk responded to the court decision with just one short sentence on the short message service X, formerly Twitter: “Never register your company in the state of Delaware.” The Tesla share price fell by more than 3.5 percent in after-hours trading.
accusation of “unjustified Enrichment”
Tesla investor Richard Tornetta went to court against Musk, Tesla and several members of the Tesla board of directors. Tornetta accuses the 52-year-old multi-billionaire of “unjust enrichment”. At that time, the company boss was able to impose his conditions on the Tesla board of directors, which was not sufficiently independent.
The defendants were accused of violating their obligations to the electric car manufacturer and abetting the waste of company assets with the huge salary package for Musk.
According to legal documents, Musk received stock options worth more than $52 billion over four and a half years after the electric car maker met its goals. Tornetta speaks of the largest salary ever awarded to a manager. His lawyers welcomed Judge McCormic’s decision, which is still subject to appeal.
Musk defends salary package
Musk’s defense argued that the pay plan was negotiated fairly by a committee of independent directors. The deal was also subject to high performance and financial targets and was even approved in a shareholder vote that was not actually required.
Musk also defended his Tesla salary package during a questioning in court in November 2022. When the share package was approved in 2018, investors thought “that we would fail and go bankrupt,” said the multi-billionaire. “We were in a pretty tough situation back then, we lost a lot of money. The probability of survival was extremely low.”