Judge Rejects Elon Musk’s $55.8 Billion Tesla Pay Package, Blocks Shareholder Ratification
A U.S. judge has reaffirmed her decision to reject Elon Musk’s $55.8 billion Tesla compensation package, denying a recent attempt to validate the deal through a shareholder vote.
Chancellor Kathaleen McCormick of Delaware’s Court of Chancery ruled that the June shareholder vote could not override her earlier decision from January, which found the pay package excessive and unfair to Tesla shareholders. McCormick cited “material misstatements” in Tesla’s disclosures to shareholders, stating these undermined the ratification process.
“The motion to revise is denied,” McCormick wrote in her decision. She criticized the defense’s creative legal theories, emphasizing that they conflicted with established legal precedents.
Tesla, however, has vowed to appeal. In a statement shared on Musk’s social media platform, the company asserted that shareholders should control such decisions, not judges. Musk echoed this sentiment in a separate post.
The court also addressed a related dispute over legal fees, awarding $345 million to the plaintiff’s lawyers, far below the $5.6 billion they sought. McCormick acknowledged their calculations adhered to Delaware law but ruled that granting such an amount would result in an “excessive windfall.”
The controversy surrounding Musk’s pay package dates back to its approval by Tesla shareholders in 2018. The plan, designed to reward Musk for Tesla’s substantial growth, faced legal challenges led by Richard Tornetta, a Tesla shareholder. Tornetta accused the board of failing to act independently and alleged Musk dictated the terms of the deal, enriching himself unjustly.
During a 2022 trial, Musk defended the arrangement, arguing that Tesla investors are highly informed and capable of monitoring his leadership. He highlighted the turnaround of Tesla’s fortunes, citing the success of the Model 3, which he credited as pivotal in the company’s rise. Musk denied influencing the compensation package, emphasizing that it was crafted and approved without his direct input.
Delaware’s Court of Chancery, known for its role in overseeing corporate governance, has long been a cornerstone of U.S. capitalism. However, Musk’s dissatisfaction with the court’s rulings has prompted discussions online, including his suggestion that companies consider relocating their legal jurisdictions from Delaware.
The saga continues as Tesla prepares to challenge the ruling, keeping shareholders and industry observers closely tuned to the unfolding drama.
