December 2nd 2024.
A recent court decision has upheld the ruling that Tesla must revoke Elon Musk's massive pay package. This comes after a lawsuit filed by a Tesla shareholder who challenged the 2018 compensation package that Musk had engineered for himself. The court found that the negotiations between Musk and the corporate directors were not conducted independently, leading to a potential maximum value of $56 billion for the pay package.
Despite attempts by Musk and Tesla's attorneys to have the ruling vacated, the judge reaffirmed her decision and also rejected the plaintiff attorneys' request for a fee award of over $5 billion in Tesla stock. Instead, the judge awarded them $345 million, stating that their arguments for a larger fee were "fatally flawed."
In response to the ruling, Musk took to social media to express his disagreement, stating that shareholders should have the final say, not judges. However, the judge stood by her decision, citing multiple misstatements in the proxy statement and noting that a stockholder vote alone cannot ratify a transaction involving a conflicted controller.
Meanwhile, the plaintiff attorneys argued that their work resulted in a "massive" benefit for Tesla, as they were able to return shares to the company that would have otherwise gone to Musk and diluted the stock held by other investors. They valued this benefit at $51.4 billion, but the judge found their request for a $5.6 billion fee to be excessive and a "windfall."
In her ruling, the judge acknowledged the sound methodology used to calculate the fee request but stated that the greater policy concern of preventing windfalls to counsel must take precedence. As a result, she awarded them $345 million, which she deemed to be an appropriate sum for their "total victory" in the case.
This fee award is significant, but it pales in comparison to the record $688 million awarded in a similar case in 2008. Overall, the court's decision serves as a reminder that large pay packages, especially those that are not independently negotiated, can have serious consequences for both companies and their shareholders.
[This article has been trending online recently and has been generated with AI. Your feed is customized.]
[Generative AI is experimental.]
