Both times, the judge said Musk had improperly influenced Tesla’s board during negotiations for his compensation
- A judge has rescinded a pay package of US$56 billion to Elon Musk for the second time
- The ruling said Musk influenced the board during original pay negotiations
- Musk and Tesla plan to appeal the decision, which could take another year to play out
Recommended Videos
In her January ruling, McCormick called the package “unfathomable.” The ruling was based on her conclusion that Musk had “overwhelming influence” on the board during the negotiations and dictated the terms of the plan to the directors, even though he only held about 22% of the auto company’s stock; and that the directors were “not independent” and approval of the payment was “deeply flawed.” The amount was 33 times larger than the pay package he’d been given in 2012.
McCormick rejected that argument, saying it was fatally flawed and that a stockholder vote alone could not overturn a transaction involving a conflicted controller. In her decision, she wrote that, “The large and talented group of defense firms got creative with the ratification argument, but their unprecedented theories go against multiple strains of settled law.”
The three law firms who represented the dissenting shareholders and brought the case before the Delaware court also got a bit greedy, asking for US$6 billion from Tesla for their work. McCormick said that, “In a case about excessive compensation, that was a bold ask,” and awarded them US$345 million for their work, which Tesla can pay in cash or stock to them.
On Twitter X, Musk posted that “Shareholders should control company votes, not judges.” Tesla posted that “A Delaware judge just overruled a supermajority of shareholders who own Tesla and who voted twice to pay @elonmusk what he’s worth,” and that “The court’s decision is wrong, and we’re going to appeal.”
The pay package was in stock options, and that original US$56 billion is now worth approximately US$101 billion.
Following the U.S. election, president-elect Donald Trump said he will appoint Musk as co-leader of his new Department of Government Efficiency – to which we ask, wouldn’t just one person leading it be more efficient? – tasked with reducing government spending. Since it’s not an official government office, Musk won’t hold a government position, which will allow him to keep his position at Tesla, SpaceX, and other companies. It’s estimated that the Tesla stock he currently holds, not counting this disputed pay pack, is worth around US$150 billion.
Sign up for our newsletter Blind-Spot Monitor and follow our social channels on X, Tiktok and LinkedIn to stay up to date on the latest automotive news, reviews, car culture, and vehicle shopping advice.