For the second time, a Delaware judge has ruled against Tesla’s attempt to reinstate Elon Musk’s $56 billion pay package. This decision upholds an earlier ruling that the compensation plan was improperly granted, adding another chapter to a long-running saga that has garnered attention due to its scale and the questions it raised about corporate governance.
The pay package, originally granted in 2018, tied Musk’s compensation to Tesla’s long-term performance, with no guaranteed salary. Without a set paycheque, the deal included stock options that would vest based on Tesla’s market value and operational milestones.
However, the plan faced legal challenges after some shareholders argued that the approval process had been flawed and that it improperly granted the CEO an excessive reward for achievements that were already within his reach.
In a ruling delivered on December 2, 2024, Judge Kathaleen McCormick reaffirmed her earlier decision to void the pay plan, stating that even a shareholder vote held since the first ruling, which took place during Tesla’s annual meeting in June 2024, could not validate the deal retroactively. The judge emphasized that such a vote could not “ratify” the plan due to the manner in which it was originally structured and approved. (via CNBC)
Musk’s legal team had argued that the shareholder vote at the 2024 meeting should have resolved the issue and that the plan’s approval was in line with shareholder interests. However, Judge McCormick did not agree.
In addition, Judge McCormick’s ruling said Tesla must pay a $345 million attorney fee award for the law firm that successfully challenged the pay package on behalf of Tesla’s shareholders. The law firm was asking for as much as $6 billion in compensation.
Musk has the option to appeal the decision to the Delaware Supreme Court, which he likely pursue in the coming weeks.
