U.S. Judge Upholds Rejection of Elon Musk’s $55.8 Billion Tesla Pay Deal

Summary:

A U.S. judge upheld the rejection of Elon Musk’s $55.8 billion Tesla compensation package, ruling that a shareholder vote to ratify it couldn’t overturn the earlier decision, which deemed the deal excessive. Tesla plans to appeal, with Musk stating shareholders should control votes. The court also awarded $345 million in attorney fees, far less than the $5.6 billion requested. The compensation package, approved in 2018, was challenged by a shareholder who accused Musk of unjustified enrichment and undue influence over Tesla’s board.

A U.S. judge has reaffirmed her decision to block Elon Musk’s $55.8 billion compensation package at Tesla, rejecting efforts to validate the deal through a shareholder vote. Chancellor Kathaleen McCormick of Delaware’s Court of Chancery ruled that the June vote, intended to ratify the package, could not reverse her earlier January judgment that the pay deal was excessive and unfair to shareholders. McCormick criticized Tesla’s attempt to resubmit the package, highlighting “material misstatements” in the documents presented to shareholders. In response, Tesla vowed to appeal the ruling, with Musk asserting that decisions about company votes should be made by shareholders, not judges.

Additionally, the court awarded $345 million in attorney fees, a far cry from the $5.6 billion originally sought by the plaintiff’s legal team. The compensation plan, initially approved by Tesla shareholders in 2018, was designed to reward Musk for his leadership in the company’s dramatic growth. However, it faced opposition from shareholder Richard Tornetta, who argued that Musk had exerted undue influence over the board and that the plan resulted in “unjustified enrichment” for Musk. This legal challenge has sparked ongoing debate over executive compensation and corporate governance.