Elon Musk’s Tesla pay package is still stuck in limbo as a judge has rejected all attempts to reinstate it. The Delaware court ruling over the Tesla CEO’s pay package upholds a previous ruling from January that had determined that the proposed compensation plan was unfairly determined. Tesla tried to sway the decision through a shareholder vote, but it was not enough to overturn the ruling.
Reports suggest that Elon Musk’s compensation package of approximately $56 billion is one the largest compensation plans for a public company executive in U.S. history. While Musk has referred to the ruling as “absolute corruption” and Tesla has expressed its desire to file an appeal, the judge appears committed to holding her ground on the matter.
The pay package was initially approved in 2018 but was later disputed by shareholders who filed a lawsuit against the company.
Image: Tesla
Elon Musk’s Tesla Pay Package Rejected Once More
On December 2, Chancellor Kathaleen McCormick of the Court of Chancery revisited the Elon Musk Tesla pay package issue and determined that the compensation offer was unwarranted. McCormick was the same judge who had presided over the case in January where she found the package to be excessive and had determined that “Tesla’s board capitulated to Musk’s terms and failed to prove that those terms were entirely fair.”
After the ruling, Musk turned to Twitter/X to denounce the company’s incorporation in the state of Delaware, and this marked the beginning of the shift of Tesla’s state of incorporation to Texas instead. Musk threatened to leave the company if the package was not approved.
In response, Tesla conducted a shareholder vote in June, where investors were invited to ratify the compensation plan that had been outlined for the CEO. The 75% vote results leaned in Musk’s favor and the CEO’s legal team used it as evidence that the EV organization was in full support of the determined package, but McCormick was not swayed by the results.
What Did Musk’s Attorneys Have to Say?
Tesla’s defense stated that the pay package was fair compensation for Musk’s role in the company’s growth and would guarantee his continued commitment to expanding the business and its various ventures. The team also insinuated that the judge’s ruling was undermining the shareholder’s right to determine what was best for the company, allowing judges and lawyers to run the companies over the rightful owners.
According to CNBC, the Delaware judge wrote, “Even if a stockholder vote could have a ratifying effect, it could not do so here.” She continued, “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.”
Now That Elon Musk’s Pay Package Has Been Rejected, What’s Next?
Elon Musk’s Tesla pay package was valued at $56 billion at the time of the initial January ruling, but the latest numbers indicate that it is currently valued at $101.5 billion thanks to Tesla’s soaring stock prices. It is likely that Musk will appeal the ruling and make another attempt at securing the compensation package once the judge enters a final order.
It could take another year for the appeal to be processed which means another delay before the compensation package is officially put into effect. Tesla could alternatively throw together a different compensation plan that keeps with the ruling, but it appears unlikely that this will be the strategy going forward.
The plaintiff’s lawyers had also sought $5.6 billion in Tesla stock as compensation for their own investments in the case. While McCormick agreed with the methods used to calculate the fee, she only awarded them $345 million, which is lower than the expected amount but still a hefty sum.
Despite the rejection of the pay package, Musk remains the wealthiest man in the world, with his net worth undisturbed by current proceedings and expected to grow further in the coming year.
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