This is a very unusual ruling because judges usually defer to boards’ compensation decisions as well within their discretion under the broad protection of the business judgment rule. But this was a $2.6 BILLION pay package. And, significantly, the compensation committee had conflicts.
A Delaware judge ruled on Friday that Tesla Inc’s (TSLA.O) 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….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.