Delaware Judge Upholds Decision to Reject Elon Musk’s $56 Billion Tesla Pay Package
In a pivotal ruling, Delaware’s Chancellor Kathaleen McCormick has rejected Tesla’s bid to restore CEO Elon Musk’s controversial $56 billion compensation package. Despite a June shareholder vote in favor of reinstating the pay, McCormick ruled that the decision from January—rescinding the package due to its excessive nature—remains in effect.
The court emphasized that Tesla’s board could not simply “reset” the process by creating new circumstances to justify Musk’s reinstated pay. McCormick criticized the company’s efforts, stating, “Were the court to condone the practice of allowing defeated parties to create new facts for the purpose of revising judgments, lawsuits would become interminable.”
This decision comes as a blow to Musk, the driving force behind Tesla’s innovative advancements. Tesla’s legal team had argued that the compensation package was justified, citing Musk’s contributions to the company’s status as the world’s most valuable carmaker. However, McCormick highlighted material misstatements in Tesla’s proxy statement regarding the shareholder vote, further undermining the legitimacy of the company’s case.
Tesla shares dropped 1.4% in after-hours trading following the announcement, reflecting investor concerns about the decision’s impact on Musk’s future with the company.
Legal and Financial Implications
McCormick also ruled that Tesla must pay $345 million in legal fees to the attorneys who initially challenged the compensation package, a figure far less than the $6 billion originally sought. The payment can be made in cash or Tesla stock.
The plaintiff’s legal team, Bernstein Litowitz Berger & Grossmann, expressed satisfaction with the ruling and stated its readiness to defend the decision if Tesla and Musk appeal to the Delaware Supreme Court.
Looking Ahead
Tesla and Musk are expected to appeal the ruling, a process that could take up to a year. If upheld, this decision could set a significant precedent regarding executive compensation and shareholder rights.
This case originated in 2018 when Tesla shareholder Richard Tornetta sued to challenge Musk’s pay package, arguing it was disproportionate and not aligned with Delaware corporate law. Shareholders have since flooded the court with concerns, warning that rescinding the pay could push Musk to divert his attention to other ventures, including artificial intelligence projects.
The decision raises questions about the balance between rewarding innovation and ensuring corporate accountability, as Tesla faces ongoing scrutiny from both investors and regulators.
Source : Swifteradio.com
