In a high-profile ruling, a Delaware judge denied reinstatement of Elon Musk’s $56 billion pay package despite shareholder approval. Judge Kathaleen McCormick held onto her January ruling, claiming that Musk’s power had an excessive impact on Tesla’s Board members.
Tesla strongly disagreed with the decision, calling it wrong and pledging to appeal. “This ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware companies rather than their rightful owners—the shareholders,” the company said on social media.
The contested pay package established in 2018 would have marked the largest compensation ever granted to a CEO. Judge McCormick ruled that Tesla failed to justify the package as fair despite the argument presented by its legal team.
Judge McCormick also stated that the shareholder vote, which passed by 75% in June, lacked sufficient independence to validate the deal. Musk, the CEO of Tesla, SpaceX, and X, boasts a net worth of $350 billion, making him the world’s richest individual.
President-elect Donald Trump recently appointed the billionaire, a dominant figure in the business world, to lead a newly formed Department of Government Efficiency. This department aims to streamline regulations, reduce government waste, and restructure federal agencies.
The ruling also granted $345 million in fees to the Tesla shareholder who initiated the case. However, their request for $5.6 billion in Tesla shares was denied. Charles Elson, a Corporate Governance expert from the University of Delaware’s Weinberg Center, condemned this decision, stating, “You had a board that wasn’t independent, a process that was dominated by the chief executive, and a package that was way out of any sort of reasonable bounds.”
Tesla might attempt to reintroduce a similar pay structure in Texas, where it relocated its legal base earlier this year. Elon Musk’s $56 billion pay package decision emphasizes transparency and independence in business.
