A judge in Delaware called the compensation package an "unfathomable sum" that's unfair to shareholders.
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Elon Musk's $56 billion Tesla pay package has been tossed out by the court
The judge called Musk's compensation an 'unfathomable sum.'
In 2018, Tesla awarded Elon Musk a $56 billion pay package that helped propel him to the top of world's richest lists. Now, a judge in Delaware has rendered the deal between the company and the CEO to be invalid and called the compensation an "unfathomable sum" that's unfair to shareholders. As initially seen and reported by Chancery Daily on Threads, the court of Chancery in Delaware has released its decision on the lawsuit filed by Richard Tornetta. The Tesla shareholder accused the automaker of breaching its fiduciary duty by approving a package that unjustly enriches its chief executive.
Judge Kathaleen McCormick wrote in the decision that Musk "enjoyed thick ties" with the directors who were in charge of negotiating his pay package on behalf of Tesla, which means there "was no meaningful negotiation over any of the terms of the plan." The judge also talked about how Musk owned 21.9 percent of the automaker when the package was negotiated. That gave him "every incentive to push Tesla to levels of transformative growth," because he stood to gain $10 billion for every $50 billion in market capitalization increase.
"Swept up by the rhetoric of 'all upside,' or perhaps starry eyed by Musk’s superstar appeal, the board never asked the $55.8 billion question: Was the plan even necessary for Tesla to retain Musk and achieve its goals?" the judge wrote in the court document. As
The Washington Post notes, she ruled that Tornetta is entitled to a "rescission" and has ordered Tesla and its shareholders to carry out her decision and undo the deal. Musk's camp, however, can still appeal her ruling.
Elon Musk suffered one of the biggest legal losses in U.S. history this week when the Tesla CEO was stripped of his $56 billion pay package in a case brought by an unlikely opponent, a former heavy metal drummer. Richard Tornetta sued Musk in 2018, when the Pennsylvania resident held just nine...
news.yahoo.com
Elon Musk bashed by heavy metal drummer who cost him $56 billion
Elon Musk suffered one of the biggest legal losses in U.S. history this week when the Tesla CEO was stripped of his $56 billion pay package in a case brought by an unlikely opponent, a former heavy metal drummer.
Richard Tornetta sued Musk in 2018, when the Pennsylvania resident held just nine shares of Tesla. The case eventually made its way to trial in late 2022 and on Tuesday a judge sided with Tornetta, voiding the enormous pay deal for being unfair to him and all his fellow Tesla shareholders.
Tornetta could not be reached for a comment and his attorney declined to comment.
Until Tornetta's case, Musk prevailed in a string of trials accusing him of defamation, of breaching his duty to shareholders and of violating securities laws.
Based on his online presence, Tornetta seems to have more of an interest in creating audio gear for car-customizing enthusiasts than going after corporate excess and malfeasance.
He has posted light-hearted videos about gadgets he has created or mishaps, including describing how he torched his eyebrows.
Tornetta also turned up in videos drumming at the legendary former New York club CBGB with his now-defunct metal band "Dawn of Correction", which described its sound as "a swift kick to the face with a steel-toed work boot."
On social media, fans of Tesla and Musk seemed to find the case a travesty of justice and speculated about Tornetta's intentions and political affiliations, asking how an investor with such miniscule holdings could wield such power.
Delaware corporate case law is full of cases bearing the names of individual investors with tiny shareholdings who wound up shaping America's corporate law.
Many law firms that represent shareholders keep a stable of investors they can work with to bring cases, says Eric Talley, who teaches corporate law at Columbia Law School. They might be pension funds with a broad range of stock holdings but they are also often individuals like Tornetta.
The plaintiff signs paperwork to file the lawsuit and then generally gets out of the way, says Talley. The investors don't pay the law firm, which takes the case on contingency, as the lawyers did in the Musk case.
Tornetta benefits from winning the case the same way other Tesla shareholders benefit: saving the company billions of dollars that a subservient board of directors paid to Musk.
