Elon Musk became one of the richest persons in the world after his 2018 pay package was thrown out by a Delaware state court judge.
Musk and the Tesla board were found to have failed to fulfil their burden of proof regarding the fairness of the pay scheme by the judge.
After deducting the modest exercise price of $23.34 per share, the 303 million split-adjusted stock options that Elon Musk received as part of the deal are now valued at $51 billion based on Tuesday’s closing price.
The case was heard in Delaware, the incorporation state of Tesla and numerous other significant US firms.
The shareholders’ lawyers contended that the disproportionate stock option package and the directors’ lack of true independence and proximity to Musk compromised their ability to adequately represent the interests of the company’s owners.
Additionally, they said that the financial benchmarks that the business had to meet in order for Elon Musk to be eligible for each of the twelve distinct stock blocks were not the “stretch performance goals” that the business had disclosed to shareholders in order to win their approval for the package.
The pay package was approved by a shareholder vote, Musk and the Tesla board contended, and since it was approved, the value of the shareholders’ Tesla shares had increased significantly.
At the closing of trade on Tuesday, the company’s market capitalization, which increased by more than 1000%, stood at $607 billion, up from $54 billion at the same time the bonus package was authorized.
The Delaware Supreme Court may hear an appeal of the ruling.
To keep Elon Musk concentrated on Tesla’s performance rather being sidetracked by his other interests, some experts and investors recommended that Tesla grant him a new compensation package.
