The board is not independent and has been sued and returned money.
Elon Musk, Larry Ellison, and other current and former Tesla board members agreed to return over $735 million to settle a shareholder lawsuit that alleged Tesla directors "grossly" overpaid themselves. The Tesla directors, who also include Musk's brother Kimbal Musk, further agreed to forego stock options and other compensation for board service in 2021, 2022, and 2023.
"Musk has installed his family and friends on the Company's Board and through them he dominates and exercises control over Tesla and is able to avoid independent oversight of the way he runs the Company," the 2020 lawsuit alleged. "In return, with Musk's blessing and vote as a director, the Director Defendants have consistently paid themselves unfair and lavish compensation" that "grossly exceeds norms for corporate board compensation."
Jan 30 (Reuters) - A Delaware judge tossed out Elon Musk's record-breaking $56 billion Tesla (TSLA.O), opens new tab pay package on Tuesday, calling the compensation granted by the EV maker's board "an unfathomable sum" that was unfair to shareholders.
Here are some reactions to the ruling:
KRISTIN HULL, FOUNDER OF NIA IMPACT CAPITAL, WHICH OWNS TESLA SHARES:
The court's decision "really speaks to the power of a shareholder to get involved with the board is not doing its job. We've seen the board is beholden to him. This is the bro-show.
"This company and this particular CEO see themselves as above the law in a lot of ways."
ADAM BADAWI, PROFESSOR OF LAW AT UNIVERSITY OF CALIFORNIA, BERKELEY:
"If this ruling stands, it will put a sizable dent into his net worth.
"I think essentially what the court is saying is like, 'Look, we're not literally taking money out of Elon Musk's pocket,' although he certainly will feel that way because he hasn't exercised shares. So the board can redo, they can give him a new grant in a way that has better process and in a way where the amount is justified by what matters to Tesla shareholders."
ROSS GERBER, PRESIDENT AND CEO AT GERBER KAWASAKI WEALTH & INVESTMENT MANAGEMENT:
"The current board can't negotiate a new pay package for Musk because they've already been ruled non-independent. They need an independent board of directors and they're gonna need to sweep out at least three or four directors to really find independent people to negotiate this pay contract or else it will be voided. So essentially, the entire corporate structure of Tesla has been deemed, not appropriate for a public company."
JOHN COFFEE, PROFESSOR AT COLUMBIA UNIVERSITY LAW SCHOOL:
"He may appeal because he has little to lose from appealing. I would not expect the (Delaware Supreme Court) to reverse the chancellor but it certainly could happen. As for a 'shakeup of the board,' it need not be that dramatic - one or two clearly independent directors are all that is needed." |
