Delaware judge says Tesla board must face trial over Musk's mega-pay package

WILMINGTON, Del.: A Delaware judge ruled on Friday that Tesla Inc's board of directors must defend at a trial Chief Executive Elon Musk's multibillion dollar pay package, which a shareholder lawsuit said unjustly enriched the head of the electric vehicle company.

On Friday, Vice Chancellor Joseph Slights of the Delaware Court of Chancery ruled against Tesla's request to dismiss the lawsuit by shareholder Richard Tornetta at an initial phase in the litigation because of the way the board approved the package. Tornetta had asked that the pay package be rescinded and the board of Tesla be overhauled to better protect investors.The ruling turned on Tesla's compensation committee, which the company conceded was not independent of Musk, according to Slight's opinion. Had the package been negotiated by truly independent directors and approved by a majority of shareholders who were unaffiliated with Musk, Slights said he would have dismissed the lawsuit.

Musk's compensation package passed shareholder approval with about 73 percent of votes cast, excluding votes by Musk and his brother Kimbal. The vote result indicated some, but not all, big investors were prepared to support a large payout at the founder-led company, which has struggled to produce its electric vehicles efficiently and profitably.

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