Tesla CEO Elon Musk will have to cough up a huge sum of $56 billion (about 74 trillion won) in a lawsuit from minority shareholders who own only 9 shares of Tesla stock.
A Delaware court ruled on the 30th (local time) invalidating Musk’s $56 billion wage package.
Judge Catherine McCormick ruled in her ruling that “Musk’s pay package was improperly set by Tesla’s board of directors.” He added, “Musk’s pay package is invalidated until there is an agreement between the litigating parties.”
The lawsuit was filed by Tesla shareholder Richard Tornetta. He owns only 9 shares of Tesla stock. A minority shareholder, who holds only 9 shares, is competing with Musk, who once owned 22% of Tesla shares.
You could say it’s a fight between a shrimp and a whale. However, the court’s ruling increased the likelihood that the shrimp would beat the whale.
In the complaint, Tonetta claimed that the CEO pay package that Tesla granted to Musk in 2018 was unprecedentedly high in history.
He filed this lawsuit in October 2022, claiming that Tesla’s board of directors failed to disclose important information to shareholders while approving a $56 billion compensation package for Musk in 2018.
According to the compensation package, Musk does not receive a salary or bonus from Tesla, but can exercise up to 110 million shares of stock options 12 times depending on whether goals such as company sales and market capitalization are achieved.
Toneta claimed that Musk pressured the board of directors to approve the compensation plan four years ago. In fact, it is known that Tesla’s board of directors has many issues with independence, with Musk’s own younger brother serving as a Tesla director.
He pointed out that there were many problems with giving Musk the right (option) to acquire a large number of Tesla stocks, especially when the stock price was rising.
In this lawsuit, the U.S. court initially ruled in favor of Toneta.
This lawsuit has become more important since Musk acquired Twitter in 2022. Toneta argued that Musk had neglected his duties as Tesla CEO by focusing on acquiring Twitter while Tesla’s stock price was plummeting and competition for electric vehicles was intensifying.
He added that the reason shareholders allowed Musk to pay a high salary was to focus on Tesla, but Musk violated this.
In response, Musk argued at trial that “my enormous influence on the electric vehicle industry justifies my high salary.”
Immediately after the ruling, Musk booed the court through his
Musk plans to appeal, so the final ruling is expected to be made in a higher court.
Although the ruling from the higher court is still pending, minority shareholders holding only 9 shares are shaking up Musk, the majority shareholder and founder who once held 22% of the shares.
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.