Elon Musk's US$56b Tesla pay package rejected again by US judge

A Delaware judge has ruled that Tesla CEO Elon Musk failed to reinstate his 2018 CEO compensation package, valued at around US$56 billion, despite the company's shareholders agreeing to reinstate it six months ago.

The pay plan is said to be the largest executive compensation package in U.S. history for a publicly traded company, according to CNBC. 

This comes after Chancellor Kathaleen St. Jude McCormick ruled in January that the US$56 billion compensation package awarded to Musk by the Tesla board was invalid, as she considered it excessive, according to The Guardian.

McCormick stated that Musk had individually controlled Tesla and dictated his compensation terms to a board that failed to negotiate fairly. She also said that the process leading to the plan's approval was deeply flawed.

While Tesla’s board of directors voted on 13 June to reaffirm the compensation package, the Delaware court maintained its January ruling. In a 101-page decision, McCormick concluded that a vote by Tesla shareholders taken this past June which sought to ratify the issuance of stock options which the court had earlier rescinded was ineffective to overturn the post-trial decision of the court.

According to the report, McCormick pointed out major procedural flaws in the board's adoption of the plan in 2018. Additionally, because many board members were close associates of Musk, the majority were considered biased in his favour.

Meanwhile, Tesla said in court filings that the judge should acknowledge a subsequent June vote by its shareholders endorsing the pay package for Musk, the driving force behind the company's many advancements, and reinstate his compensation. It argued that Musk has achieved the milestones set out when the pay package was created.

McCormick has granted a US$345 million attorney fee award to the lawyers who successfully represented Tesla shareholders in their lawsuit to void Musk's pay plan.

"We are pleased with Chancellor McCormick’s ruling, which declined Tesla’s invitation to inject continued uncertainty into court proceedings and thank the Chancellor and her staff for their extraordinary hard work in overseeing this complex case,” said attorneys from Bernstein, Litowitz, Berger & Grossmann, the firm representing the plaintiff in a statement.

The pay package, now worth around US$101 billion based on Tesla’s closing share price yesterday, is made up of 303 million Tesla stock options, according to CNN.

In response, Tesla said on X today that the court's decision is wrong and that it intends to appeal the ruling. "A Delaware judge has just overruled a supermajority of shareholders who own Tesla and who voted twice to pay Musk what he’s worth,” the post reads.

“Shareholders should control company votes, not judges,” Musk said in another post on X.

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