A Delaware judge on Monday affirmed an earlier ruling that rescinded a giant pay package that Tesla had awarded its chief executive, Elon Musk.
The pay, in the form of stock options, was worth more than $50 billion and helped make Mr. Musk the richest person in the world. The package is now worth $100 billion after Tesla’s share price jumped sharply in recent weeks.
The judge, Chancellor Kathaleen St. J. McCormick of the Delaware Court of Chancery, struck down the award in January, ruling that shareholders had not been properly informed of its details and that members of Tesla’s board were not sufficiently independent.
But lawyers for Tesla and Mr. Musk argued that a second shareholder vote in June in favor of the package cleared the way for effectively reinstating it.
The pay comes from a 2018 award that said Mr. Musk would get all the options only if Tesla’s stock price soared and its sales and earnings grew strongly. Few expected Mr. Musk to achieve all of those targets because Tesla was still struggling to sell enough electric cars to become profitable. But Tesla’s business took off and its stock rocketed higher, allowing Mr. Musk to earn all the options in the following years. He has to hold them for five years.
The shareholder who brought the suit, Richard J. Tornetta, contended that Tesla’s board had not acted independently of Mr. Musk when devising the package and that the company had provided “materially misleading” information to investors. In her January ruling, after a trial in 2022, Chancellor McCormick said, “The process leading to the approval of Musk’s compensation plan was deeply flawed.”
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