Tesla and CEO Elon Musk have been hit with an unprecedented blow after a Delaware Judge determined that the $56 billion granted to them was an extraordinary sum, which could put their shareholders’ unfairly disadvantaged.
Judge Kathaleen McCormick asked if Tesla’s success and shareholder value could only be achieved through such a lavish plan.
Tesla executives contended that the pay raise was essential to keep Musk motivated and committed to the company during the trial. Despite this, the board did not disclose the possibility of meeting internal objectives and projections, raising doubts about the sincerity of compensation decisions.
It is possible to appeal the decision, but it would eliminate the highest pay package in corporate America.
Tesla shares decreased in extended trading after the verdict as investors awaited hints of reversal due to governance concerns.
Elon Musk’s recently claim of 25% voting control, which he made public on his social media platform X, may pose hurdles before the judge will make an initial ruling. The Judge’s criticism of the board’ decision-making process has led legal experts to believe that Musk’ request could be dismissed prematurely.