A Delaware court ruling has upheld the rejection of Tesla’s CEO, Elon Musk, $56 billion pay package, denying the company’s request to revise the decision despite shareholder approval to revalidate the deal.
The ruling, issued by Chancellor Kathaleen McCormick, effectively dismisses Tesla’s overturn of her initial decision.
The decision came after a lengthy court case, with Tesla’s legal team attempting to challenge McCormick’s earlier ruling that invalidated Musk’s compensation package, awarded in 2018 when the company was struggling.
The deal, structured around stock price targets, was later achieved as Tesla’s performance improved. However, the package came under investigation after Richard Tornetta, a former corporate lawyer, filed a lawsuit alleging that shareholders had been misled during the approval process due to Musk’s excessive influence over the company’s board.
In her 103-page opinion, McCormick outlined several key reasons for rejecting Tesla’s appeal. The court found that Tesla’s argument, which sought to use the re-ratified shareholder vote as a basis to revise the ruling, was fundamentally flawed.
McCormick noted that the company’s legal team had failed to present a valid procedural case for overturning the decision, particularly since such issues cannot be raised after a post-trial opinion.
She also criticised the idea of “common-law ratification,” asserting that it lacked legal standing and was inconsistent with the principles of corporate governance at Tesla.
Again, McCormick pointed to misleading information in Tesla’s proxy statement, which she claimed contained material misstatements regarding the effect of the shareholder vote. This, she noted, rendered the attempt to revalidate the deal invalid.
In addition to her decision on the pay package, McCormick awarded the plaintiff’s lawyers a $345 million fee, far less than the $5.6 billion they had initially requested. Despite this, the ruling represents a huge moment in the ongoing issues over Musk’s compensation.
Tesla has already announced plans to appeal the decision to the Delaware Supreme Court, but the case is complicated by the company’s recent move from Delaware to Texas.
The involvement of Elon Musk in political affairs, particularly his close ties with President-elect Donald Trump, further complicates the broader context in which this case is unfolding.
