Judge Upholds Decision to Void Elon Musk’s $55 Billion Compensation at Tesla
Elon Musk’s substantial compensation package from Tesla has been blocked once more by a Delaware judge, casting uncertainty on the future of his $55 billion pay arrangement. The decision comes after Tesla shareholders had initially backed the plan, despite a previous ruling nullifying the package.
Delaware Chancellor Kathaleen St. J. McCormick, in her latest filing, stated, “The large and talented group of defense firms got creative with the ratification argument, but their unprecedented theories go against multiple strains of settled law.” Read more.
Chancellor McCormick maintained her prior stance that Tesla’s board was unduly influenced by Musk when designing his compensation package, which was recognized as the largest ever awarded to a CEO. Her decision emphasized that evidence presented after the trial was insufficient to alter her original findings, and she ordered Tesla to compensate plaintiffs with $345 million, potentially payable in stock.
Following the announcement, Tesla’s stock experienced a decline of nearly 1.5% in after-hours trading. Despite the setback, Tesla representatives have not yet provided comments on the ruling.
Back in June, Tesla’s shareholders had voted in favor of the pay package for Musk, marking the second approval since 2018. However, McCormick had earlier nullified the agreement when a shareholder sued the company, arguing that the compensation was “beyond the bounds of reasonable judgment.”
In her prior ruling, McCormick noted that Musk wielded excessive power over the agreement due to his close ties with board members, resulting in what she termed an “unfair price.” She also highlighted Tesla’s failure to adequately inform investors about the proposal’s details.
At the time of its nullification, Musk’s package was estimated to be worth approximately $55 billion.
McCormick clarified in her recent filing, “Contrary to how some have read the Post-Trial Opinion, the court did not find that the Board should have paid Musk nothing. There were undoubtedly a range of healthy amounts that the Board could have decided to pay Musk. Instead, the Board capitulated to Musk’s terms and then failed to prove that those terms were entirely fair.”
Despite Tesla’s efforts to secure shareholder approval, McCormick reiterated in her latest ruling, “Even if a stockholder vote could have a ratifying effect, it could not do so here.”
