Despite Tesla and shareholders' support, for the second time, a Delaware judge has determined that Elon Musk cannot be entitled to the proposed $56 billion pay package originally granted by the EV company.
Chancellor Kathleen McCormick, from the Delaware Court of Chancery, had her decision made after a shareholder vote in June backed to reinstate the pay package. She ruled that the pay package was excessive and overturned the decision. The ruling has continued uncertainty over Musk's future at Tesla and his compensation as the pay package was rescinded earlier this year.
As a response, Tesla disagreed with the ruling and, instead, indicated that shareholders should be the ones making decisions in a company rather than judges and courts. The EV company will not back down as Reuters reported that it intends to appeal the ruling, while it's likely to take up to a year for the case to be resolved.
To be clear, although Tesla shareholders had voted for the package, the judge argued that the vote could not be used retroactively to reinstate the compensation. McCormick stated that the compensation plan was quite unfair to shareholders as the board failed to control Musk during his negotiating process.
Elon Musk's Pay Package
One of the reasons why Musk's pay package reached $56 billion is due to stock options in 2018 tied to Tesla's achievement of highly ambitious performance targets. In fact, at some, its value has ballooned to about $101 billion due to a meteoric rise in Tesla's stock price. Musk's proponents say that his leadership and success at Tesla justify the package, while detractors deem it unreasonable.
Besides the court's rejection of the billion-dollar pay package, the court also ordered Tesla to pay $345 million in attorney fees to the plaintiffs. While Musk was expecting a huge payout, this marked one of the most significant fee awards in securities litigation, according to CBC.
Musk has taken to social media to express his frustration with the ruling, condemning the judge and calling on companies to re-incorporate in states like Texas, where corporate governance laws are more likely to be beneficial to executives. However, it's worth noting that the influence of Musk over Tesla and other ventures is not diminishing even with the current legal battles.
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