Business
Elon Musk Cannot Keep Tesla Pay Package Worth More Than $55 Billion, Judge Rules
DOVER, Delaware – Elon Musk does not have a right to the unprecedented compensation package that Tesla’s board of directors approved on Tuesday, which could be worth more than $55 billion.
Chancellor Kathleen St. Jude McCormick’s verdict comes more than five years after a shareholder lawsuit challenged Tesla CEO Musk and the company’s directors. They were accused of failing to fulfil their duties to the manufacturer of electric vehicles and solar panels, resulting in a waste of business assets and unfair enrichment for Musk.
The remuneration package, according to the shareholders’ attorneys, should be illegal because Musk dictated it and false negotiations with directors who were not independent of him led to its creation. They further asserted that shareholders who received inaccurate and incomplete information in a proxy statement approved it.
Elon Musk Cannot Keep Tesla Pay Package Worth More Than $55 Billion, Judge Rules
Defence attorneys argued that an independent compensation committee fairly negotiated the pay plan, included performance milestones so lofty that some Wall Street investors mocked them, and was approved by a shareholder vote that was not even required by Delaware law. They also claimed Musk was not a controlling shareholder because he held less than one-third of the firm at the time.
A counsel for Musk and other Tesla defendants did not immediately respond to an email requesting comment.
However, Musk responded to the verdict on X, the social media network formerly known as Twitter that he owns, by providing business advice. “Never incorporate your company in the state of Delaware,” he said. He said, “I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters.”
Musk, who topped Forbes’ list of the world’s richest people on Tuesday, challenged Tesla’s board earlier this month to devise a new pay plan for him that would include a 25% interest in the company. On an earnings call last week, Musk, who presently owns 13%, said that while he cannot control the company with a 25% ownership, he does have a significant impact.
In the November 2022 trial testimony, Musk denied that he dictated the specifics of the compensation package or attended any sessions where the board discussed the proposal, its remuneration committee, or a working group that assisted in its development.
Elon Musk Cannot Keep Tesla Pay Package Worth More Than $55 Billion, Judge Rules
McCormick concluded, however, that because Musk was a controlling stakeholder with a possible conflict of interest, the pay package needed to be held to a higher standard.
“The process leading up to the approval of Musk’s compensation plan was deeply flawed,” McCormick wrote in the colourfully written 200-page ruling. “Musk had extensive ties with the persons tasked with negotiating on Tesla’s behalf.”
McCormick also mentioned Musk’s long-standing business and personal contacts with pay committee head Ira Ehrenpreis and fellow member Antonio Gracias. She also mentioned that general counsel Todd Maron, Musk’s old divorce attorney, was in the working group negotiating the pay deal. Maron served as Musk’s main intermediary, and the court noted in its decision that it was unclear which side of the argument Maron supported. Nevertheless, Maron created many of the documents that the defendants cited as evidence of a fair process.
McCormick concluded that the only appropriate action was to cancel Musk’s remuneration deal. “In the final analysis, Musk launched a self-driving process, recalibrating the speed and direction along the way as he saw fit,” she wrote in a statement. “The procedure came at an unreasonable cost. Through this litigation, the plaintiff seeks a recall.”
Greg Varallo, a lead attorney for the shareholder plaintiff, hailed McCormick’s move to rescind Musk’s “absurdly outsized” compensation deal.
“The fact that they lost this in Delaware court is jaw-dropping,” said Wedbush Securities analyst Dan Ives. “This verdict is unprecedented. Going in, I believe investors assumed it was just legal noise and that nothing would come of it. The fact that they went head-to-head with Tesla, Musk, and the board and overturned this is a significant legal decision.”
During his trial evidence, Musk disputed that his friendships with specific Tesla board members, which included several vacations together, meant they were likely to follow his orders.
The proposal intended for Musk to earn billions of dollars if Tesla, based in Austin, Texas, met specified market capitalization and operational targets. Musk, who held approximately 22% of Tesla when the plan was authorized, would get stock equal to 1% of outstanding shares at the time of the grant. If the company’s market valuation increased by $600 billion, his stake in it would rise to almost 28%.
Elon Musk Cannot Keep Tesla Pay Package Worth More Than $55 Billion, Judge Rules
Each milestone entailed increasing Tesla’s market value by $50 billion while reaching aggressive revenue and pretax profit growth goals. Musk was only eligible for the full $55.8 billion pay plan if he led Tesla to a market capitalization of $650 billion and unprecedented revenues and earnings within a decade.
According to the plaintiff’s attorneys’ January post-trial brief, Tesla has met all twelve market capitalization milestones and eleven operational milestones, resulting in almost $28 billion in stock option profits for Musk. However, the stock option grants require a five-year holding period.
During the trial, defence counsel Evan Chesler argued that the incentive package was a “high-risk, high-reward” transaction that benefited Tesla stockholders and Musk. After the plan was implemented, the company’s worth increased from $53 billion to more than $800 billion, briefly reaching $1 trillion.
According to Chesler, Tesla included the $55 billion pay amount in the proxy statement because the business wanted shareholders to understand that “this was a heart-stopping number that Mr. Musk could earn.”
SOURCE – (AP)
Billionaire businessman and real estate mogul Frank McCourt has said he is forming a consortium to buy TikTok’s U.S. operations. He joins the list of investors hoping to benefit from a new federal law requiring TikTok’s China-based parent company to sell the popular platform or face a ban.
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Billionaire Frank McCourt Says He’s Putting Together A Consortium To Buy TikTok
The announcement, made late Tuesday on McCourt’s Project Liberty initiative, stated that the former owner of the Los Angeles Dodgers was organizing the bid in consultation with investment bank Guggenheim Securities and “with the goal of placing people and data empowerment at the center of the platform’s design and purpose.
If a sale occurs, McCourt stated that he intends to restructure TikTok and give individuals more control “over their digital identities and data” by transitioning the site to an open-source protocol that promotes transparency.
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Billionaire Frank McCourt Says He’s Putting Together A Consortium To Buy TikTok
Other investors, notably former Treasury Secretary Steven Mnuchin, are interested in buying the company. However, parent company ByteDance has already stated that it does not intend to sell the platform.
The Chinese government is also unlikely to approve a sale, particularly one involving the recommendation engine that controls the videos that appear in consumers’ feeds.
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Billionaire Frank McCourt Says He’s Putting Together A Consortium To Buy TikTok
Last Monday, ByteDance and TikTok launched a lawsuit against the US government to prevent the rule from taking effect. On Tuesday, eight creators filed their appeal, claiming that the regulation violates their First Amendment rights to free expression.
Forbes estimates McCourt’s net worth at $1.4 billion. In 2012, he sold the Dodgers for $2 billion to Guggenheim Baseball Management. In 2016, he purchased the French soccer team Marseille.
SOURCE – (AP)
On Tuesday, Little Rock, Arkansas NETFLIX – Arkansas senators questioned a sheriff’s decision to allow a Netflix documentary series to be recorded at the county jail, with one critic alleging that the move exploited inmates.
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Sheriff Faces Questions From Arkansas Lawmakers Over Netflix Series Filmed At County Jail
Pulaski County Sheriff Eric Higgins defended his decision to allow the eight-episode series “Unlocked: A Jail Experiment” to film at the county jail. The series began last month and focuses on a program that grants some offenders more freedom at the Little Rock jail.
Local and state officials have questioned the decision, claiming they were unaware of the series until just before it premiered. The show centers on a six-week experiment in which inmates in one cell block gained additional freedom by unlocking their cell doors. Higgins stated that he did not approach Netflix or Lucky 8, the production firm that filmed it, about the series.
“I took action to ensure that we have a reentry program to help those who are booked into our facility come out and become better individuals,” Higgins told members of the Joint Performance Review Committee.
Republican Sen. Jonathan Dismang said he supports the sheriff’s reentry program and trying something fresh to reduce recidivism. However, he expressed concern about it becoming the show’s center and asked how it could be termed an experiment if it was being filmed.
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Sheriff Faces Questions From Arkansas Lawmakers Over Netflix Series Filmed At County Jail
Another Republican lawmaker expressed concern about how the show will affect the state’s reputation, comparing it to a 1994 HBO documentary about gangs in Little Rock.
“For most of the people that watched this docuseries, this is the first time they’ve ever been exposed to Pulaski County, or perhaps to the state of Arkansas,” Rep. David Ray stated. “I worry about the brand damage that our state sustains from this being the first perception of our state to other people.”
Pulaski County Judge Barry Hyde, the county’s top elected official, said he was unaware of the series until he saw a trailer before it debuted. Hyde claimed that the agreement between the sheriff and the production firm was invalid since he did not sign it. The county has already returned a $60,000 cheque to the production company that filmed the series.
Higgins, a Democrat who was first elected in 2018 and is the county’s first Black sheriff, has received support from some residents. The Little Rock NAACP chapter has backed Higgins’ decision, and supporters of the sheriff packed a committee room for Tuesday’s session.
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Sheriff Faces Questions From Arkansas Lawmakers Over Netflix Series Filmed At County Jail
Democratic Senator Linda Chesterfield stated that Higgins’ supporters want “someone to provide humane treatment for people who have been treated inhumanely.”
“We are viewing this through different lenses, and it’s important we respect the lenses through which we view it,” Chesterfield stated.
SOURCE – (AP)
Business
Justice Department Says Boeing Violated Deal That Avoided Prosecution After 737 Max Crashes
Washington — Boeing has broken a settlement that let the corporation avoid criminal prosecution after two tragic disasters involving its 737 Max aircraft more than five years ago, the Justice Department told a federal judge on Tuesday.
The Justice Department will now determine whether to press charges against Boeing. The department said the prosecutors would tell the court how they wanted to proceed by July 7.
New Boeing 737 Max jets crashed in Indonesia in 2018 and Ethiopia in 2019, killing 346 people. In January 2021, Boeing negotiated a $2.5 billion deal with the Justice Department to avoid prosecution for a single fraud charge: deceiving federal regulators who authorized the airliner. Boeing blamed the fraud on two lower-level employees.
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Justice Department Says Boeing Violated Deal That Avoided Prosecution After 737 Max Crashes
In a letter filed Tuesday in federal court in Texas, Glenn Leon, head of the Justice Department criminal division’s fraud section, said Boeing breached the settlement’s provisions by failing to implement promised reforms to detect and prevent violations of federal anti-fraud statutes.
The determination means that Boeing might be prosecuted “for any federal criminal violation of which the United States has knowledge,” including the accusation of fraud that the corporation intended to avoid with the deal, the Justice Department said.
However, it is unclear whether the government will pursue Boeing.
“The government is determining how it will proceed in this matter,” the Justice Department stated in the court document. Boeing will have until June 13 to reply to the government’s allegations, and the department has stated that it will consider the company’s explanation “in determining whether to pursue prosecution.”
Boeing Co., headquartered in Arlington, Virginia, disputed the Justice Department’s finding.
“We believe we have honored the terms of that agreement, and we look forward to the opportunity to respond to the Department on this issue,” a Boeing representative stated. “As we do so, we will engage with the Department with the utmost transparency, as we have throughout the entire term of the agreement, including in response to their questions following the Alaska Airlines 1282 accident.”
Boeing has come under fresh criticism following an Alaska Airlines flight in January, when a door plug blew out of a 737 Max, leaving a gaping hole in the plane’s side. The corporation is being investigated for several reasons, including the blowout and production quality. The FBI informed passengers on the airplane that they could be victims of a crime.
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Justice Department Says Boeing Violated Deal That Avoided Prosecution After 737 Max Crashes
Prosecutors plan to speak with the families of passengers killed in the two Max disasters on May 31. Family members were outraged and dissatisfied after a similar gathering last month.
Paul Cassell, a lawyer who represents families of passengers in the second tragedy, said the Justice Department’s decision that Boeing violated the settlement terms is “a positive first step, and for the families, a long time coming.”
“But we need to see further action from DOJ to hold Boeing accountable, and plan to use our meeting on May 31 to explain in more details what we believe would be a satisfactory remedy to Boeing’s ongoing criminal conduct,” Cassell stated.
Investigations into the incidents pointed to a flight-control system that Boeing installed on the Max without informing pilots or airlines. Boeing minimized the system’s importance and did not revamp it until after the second tragedy.
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Justice Department Says Boeing Violated Deal That Avoided Prosecution After 737 Max Crashes
Following covert discussions, the government agreed not to prosecute Boeing for defrauding the United States by misleading authorities about its flight system. The settlement includes a $243.6 million fine, a $500 million victim compensation fund, and roughly $1.8 billion in payments to airlines whose Max jets had been grounded for nearly two years.
SOURCE – (AP)
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