May 20, 2024

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How does Elon Musk plan to recover his huge salary settlement?

How does Elon Musk plan to recover his huge salary settlement?

Tesla CEO Elon Musk plans to take advantage of a Delaware corporate law that will allow him to recover his massive 2018 payroll settlement.

he Huge deal to pay the CEO TeslaElon Musk is worth $56 billion in 2018 It can be revived thanks to A A little-known corporate law in Delaware that allows procedural defects to be corrected despite rescissionalson of the same in January according to Tom Hulse and Jodi Godoy on Yahoo Finance.

The electric car maker proposed on Wednesday Putting Musk's 2018 pay deal to a shareholder votedespite of A Delaware judge struck it down in January.

Tesla uses a A little-known section of Delaware corporate law allows corporations to correct procedural defects that would invalidate board decisions.

Tesla called this approach “a novel” In his securities offering he said that The special board committee that approved it could not predict how it would be treated under Delaware law.

Eric Talley is a professor at Columbia Law SchoolHe said that this ruling is intended to be a “Band aid” to Technical errors of boards of directors, not reversal of important judicial rulings.

Tesla said so in the proposal Thousands of shareholders were outraged by the ruling by Delaware State Counsel Kathleen McCormickwho found it Tesla executives were not independent when they recommended the “unfathomable” package and did not negotiate with Musk.

McCormick, after years of litigation and a week-long trial, ruled so These and other key details were hidden from investors before their vote to approve the pay package.

Tesla proposed to solve this problem in two ways. In an attempt to eliminate conflict in the board of directors, he had An independent director, Kathleen Wilson Thompson, was appointed to review the 2018 pay deal to determine whether it was in the best interests of shareholders.

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next to, Shareholders will be given the opportunity to vote again after reviewing McCormick's conclusions. Shareholders will have 120 days to appeal the proposal if approved.

Tesla did not attempt to correct the flaws in the negotiations identified by McCormick. Company It did not propose a new pay package to Musk or hire new compensation consultants to review the standard pay dealThis is according to the company's proposal.

if Shareholder approvalThis is what Al-Tali and others said It could make it easier for Musk to win an appeal in the Delaware Supreme Courtbecause It could shift the burden of proving that Musk's pay was unfair to the plaintiffs. At trial, Musk had to prove that the payment and the process were fair.

But other experts said it was The proposal would almost certainly spark more shareholder lawsuits.

This is partly because The salary package went into effect in 2018 and Musk was rewarded if Tesla reached certain milestones.Which he soon did. Musk obtained options to buy about 304 million shares of Tesla stock at a significant discountdespite of These options were never exercised.

Anne Lipton is a professor of corporate law at Tulane UniversityHe said It's not clear whether Tesla can now pay Musk not for hitting future milestones, but for past performance. Lipton added It can be considered a waste of company assets.

“They're basically saying that We give money because we love it so much and for no other reason. “This is not something that can simply be ratified by a majority vote of shareholders,” Lipton added.

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the The proposal announced by the company Wednesday raises questions about Whether board decisions that allegedly violate fiduciary duties to investors can be erased by letting shareholders, rather than a judge, decide what is acceptable.

the Delaware Law Experts They said so They were not aware of precedent that had led to a court ruling being overturned using shareholder voting in this way.

“That's the $56 billion question,” he said. Larry Hamermesh is a professor at the University of Delaware Widener School of Law. “Clearly your position is that all we have to do is have shareholders say: ‘Oh no, we hear you, advisor, but this is good for us.'”

Tesla It closed Wednesday's session lower at $154.80. The 70-period moving average is still above the price, the RSI is down at 34 points and the MACD lines are below zero.

Medium term support is at $153.75. Meanwhile, Ei indicators are mostly bearish.