FirstFT: Judge blocks Elon Musk’s $55bn pay award

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Good morning.

We start today with a court decision related to Elon Musk’s extraordinary pay package negotiated with the Tesla board in 2018 that has a potential payout of $55.8bn if certain performance targets are hit.

Kathaleen McCormick, a Delaware judge, yesterday ruled that the award was improperly approved by the electric-car maker’s board and had short-changed the company’s shareholders.

The judge also said Musk controlled the board of directors, even though he only owns 22 per cent of the outstanding shares in Tesla, and that the board was unable to demonstrate that the share grant was awarded at a fair price.

“Musk was the paradigmatic ‘Superstar CEO’ . . . and dominated the process that led to board approval of his compensation plan,” McCormick wrote in her ruling.

If the ruling is upheld and Musk’s remuneration plan is scrapped, he will lose options over 303mn Tesla shares, close to 10 per cent of the company.

“Never incorporate your company in the state of Delaware,” Musk posted on X after yesterday’s decision. “I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters.” Here’s more on the court decision and what it could mean for Tesla.

And here’s what else I’m keeping tabs on today:

• Interest rates: The US Federal Reserve is expected to leave benchmark rates unchanged in its announcement today. Chris Giles explains why the bank’s inflation battle is almost over in his latest Central Banks newsletter. Sign up here if you’re a premium subscriber, or upgrade your subscription here.

• Results: Troubled plane maker Boeing reports annual results before trading begins on Wall Street. It will be the first time the company’s management has publicly addressed shareholders since the mid-air blowout aboard the Alaska Airlines flight earlier this month. Also reporting are Mastercard, Qualcomm and Phillips 66.

• Economic data: An ADP national employment survey is projected to show that the US added 145,000 private sector jobs in January, down from 164,000 in December.

• Congress: The heads of five major social media platforms — Meta, TikTok, X, Discord and Snap — will be in Washington to testify before the Senate Judiciary Committee about protecting children online. Here’s what to expect.

• Northern Ireland: After two years of paralysis, a landmark deal which could restore the region’s power-sharing executive is set to be unveiled by Rishi Sunak’s government.

Five more top stories

1. Ken Griffin gave a pro-Nikki Haley super Pac $5mn in December and January, according to a person close to the Citadel founder, even as he expressed doubts about whether she could defeat Republican frontrunner Donald Trump. Griffin admitted yesterday that Haley’s path to victory for the Republican nomination was “a narrower road than it was eight weeks ago” following her heavy defeat in the New Hampshire and Iowa primaries. Read more of Griffin’s comments which were made to CNBC.

2. Investor buzz about Big Tech’s financial gains from generative artificial intelligence was damped after Microsoft and Google warned of more large costs this year in the arms race to develop cutting-edge AI products. Shares in the companies’ owners fell in after-market trading after they warned capital expenditure would rise this year as they invested more heavily in the technology underlying the development of generative AI. Here’s more on the companies’ results.

3. Sotheby’s was yesterday cleared of liability in a lawsuit brought by Russian billionaire Dmitry Rybolovlev, who had accused the famed auction house of participating in an alleged scheme to overcharge him for works of art. Jurors at the Manhattan federal court deliberated for five hours before finding in Sotheby’s favour on multiple counts of aiding and abetting fraud. The nearly month-long trial has captivated the fine art world.

4. An Iran-backed Iraqi militia group said it had suspended operations against US troops in the region, days after three US soldiers were killed in a drone attack on a base in Jordan that Washington blamed on “radical Iran-backed militant groups”. It follows the announcement by the White House yesterday that President Joe Biden had made a decision on how to respond to Sunday’s attacks. Here’s more on the statement from Kataeb Hizbollah.

• UN agency crisis: The UN Relief and Works Agency for Palestine Refugees has been plunged into “death spiral” after Israeli intelligence claimed 12 UNRWA employees took part in the October 7 attacks. Mehul Srivastava reports.

5. Volodymyr Zelenskyy is preparing to replace his top general in what would be the biggest shake-up of Ukraine’s military command since Russia’s full-scale invasion began. The president on Monday offered Valeriy Zaluzhny a new role as a defence adviser but the general refused, according to people familiar with the discussions. Here’s what the replacement of the popular general could mean for Ukraine’s war effort.

• ‘Ukraine fatigue’: Western countries must display the will to help ensure Russia does not prevail, or the price could prove to be beyond reckoning, writes Martin Wolf.

Visual story

Norwegian-farmed salmon is widely sold across Europe. But these sales have a dark side: the farms’ fishmeal is being sourced in a way that could create a “food crisis” on another continent. Stocks of smaller fish crucial to west African diets have become a casualty of the salmon supply chain, worsened by corruption and rule-breaking suggested in interviews with the Financial Times. Our visual investigations team digs into the hidden cost of your supermarket salmon.

We’re also reading . . . 

• Brazil’s IPO market: Is the new listings drought on Brazil’s stock market coming to an end? That at least is the talk among investment bankers and money managers on Avenida Faria Lima, the Brazilian version of Wall Street. 

• ‘This could be the best decade in history — or the worst’: Stanford professor Erik Brynjolfsson talks to the FT about what generative AI will mean for productivity, jobs and the society of the future.

• Non-state actors: It isn’t China or Russia that will dominate the post-American world, writes Janan Ganesh.

Chart of the day

Chinese investors and households have been buying gold as a refuge from local property and stock market mayhem, helping to support the price of the precious metal. Chinese investment demand for gold — spanning bars, coins and exchange traded funds — grew 28 per cent to 280 tonnes last year, according to the World Gold Council. Chinese investors face an “ugliness contest” over where to put the huge level of savings, says one expert.

Take a break from the news

Alistair Humphreys, the author of a new book championing local adventures, picks 10 apps to take on your next hike — from birdsong to naming that flower.

Additional contributions from Tee Zhuo and Benjamin Wilhelm