US judge rejects Elon Musk’s $55.8bn Tesla pay deal again

A U.S. judge has reaffirmed her rejection of Elon Musk’s $55.8 billion compensation package at Tesla, dismissing the company’s bid to reinstate the deal through a shareholder vote. 

Chancellor Kathleen McCormick of Delaware’s Court of Chancery ruled against Tesla’s attempt to ratify the package via a June shareholder vote, stating it could not override her January decision deeming the package excessive and unfair to shareholders.

In her ruling, McCormick cited “material misstatements” in documents provided to shareholders about the implications of their vote and denied Tesla’s motion to revise her decision. She criticized the defense’s legal arguments as unprecedented and contrary to established law. Tesla announced plans to appeal, while Musk, in a post on his social media platform X, argued that shareholders, not judges, should control company decisions.

The court awarded $345 million in attorney fees, a fraction of the $5.6 billion requested by lawyers for plaintiff Richard Tornetta, a Tesla shareholder. McCormick acknowledged the fee calculation method adhered to Delaware law but deemed the requested amount an “excessive windfall.”

The rejected compensation package, approved by shareholders in 2018, was structured to reward Musk for Tesla’s growth. However, Tornetta’s lawsuit accused Musk of dictating terms to a board that lacked independence and alleged the package led to Musk’s unjust enrichment, making him the world’s richest person. Musk denied influencing the deal, asserting that Tesla’s investors were sophisticated and capable of monitoring his leadership.

The Delaware Court of Chancery, where many Fortune 500 companies are registered, played a pivotal role in this high-profile case. Following the ruling, Musk reposted calls on X urging businesses to leave Delaware. Tesla remains at the center of a heated debate over corporate governance and executive pay.

Share on:  Whatsapp  Twitter  Facebook