Judge Rejects Elon Musk’s $56bn Tesla Pay Package Again

A judge has ruled that Tesla chief executive Elon Musk’s unprecedented $56bn (£47bn) compensation package will not be reinstated. This decision from the Delaware court follows months of legal contention, despite the package having been approved by shareholders and directors during the summer. Judge Kathaleen McCormick affirmed her earlier January ruling, in which she contended that board members were unduly influenced by Mr. Musk. Responding to the judgment, Mr. Musk posted on X: “Shareholders should control company votes, not judges.” Tesla declared its intention to appeal the ruling, asserting that the decision was “wrong.” The electric vehicle manufacturer further commented in an X post that, “This ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware companies rather than their rightful owners – the shareholders.” Judge McCormick stated that the pay package would have constituted the largest ever for the head of a publicly traded firm. She determined that Tesla had failed to demonstrate the fairness of the compensation plan, which originated in 2018. Mr. Musk, who leads X (formerly Twitter) and SpaceX in addition to Tesla, is recognized as the world’s wealthiest individual. His current net worth is estimated at approximately $350bn, according to the Bloomberg Billionaires Index. He frequently uses his platform to share his perspectives on a wide range of subjects, and his standing appears poised to rise further following Donald Trump’s victory in the 2024 US presidential election. The president-elect has chosen Mr. Musk to lead a newly established Department of Government Efficiency (or Doge – a reference to the dog-related meme). Trump has indicated that Doge will assist the administration in “dismantle Government Bureaucracy, slash excess regulations, cut wasteful expenditures and restructure Federal Agencies.” While a Tesla shareholder vote in June approved the payment with a 75% majority, the judge did not concur that the pay should be so substantial, despite what she termed Tesla’s lawyers’ “creative” arguments. In her opinion, she wrote: “Even if a stockholder vote could have a ratifying effect, it could not do so here.” The judge also decided that the Tesla shareholder who initiated the lawsuit against the company and Mr. Musk should be awarded $345m in fees, rather than the $5.6bn in Tesla shares they had requested. Some observers suggested that a ruling favoring Mr. Musk and Tesla would have weakened conflict of interest laws in Delaware. Charles Elson of the University of Delaware’s Weinberg Center for Corporate Governance explained that the purpose of conflict rules is to safeguard all investors, not solely minority ones. Mr. Elson described Judge McCormick’s opinion as well-reasoned, stating: “You had a board that wasn’t independent, a process that was dominated by the chief executive, and a package that was way out of any sort of reasonable bounds. It’s quite a combo.” Mr. Elson anticipates that Tesla might attempt to re-establish a similar compensation package in Texas, where the company relocated its legal base earlier this year after the initial pay ruling.