A Delaware judge has upheld her decision to reject Elon Musk’s $55.8 billion compensation package at Tesla, dismissing an attempt to restore the pay deal through a shareholder vote. Chancellor Kathaleen McCormick of the Delaware Court of Chancery ruled on Monday that Tesla’s June shareholder vote could not override her earlier January ruling, which deemed the package excessive and unfair to shareholders.
McCormick identified flaws in Tesla’s ratification attempt, including “material misstatements” in documents presented to shareholders about the impact of their vote. “The motion to revise is denied,” McCormick wrote, adding that the arguments put forward by Tesla’s defense firms went against established legal principles.
Tesla plans to appeal the decision, with Musk expressing his displeasure in a statement on X, the social media platform he owns. “Shareholders should control company votes, not judges,” Musk posted.
The court also awarded $345 million in attorney fees, significantly less than the $5.6 billion requested by Richard Tornetta, a Tesla shareholder who initiated the lawsuit. While McCormick acknowledged that the legal fees calculation was sound under Delaware law, she ruled that such a large fee would be an excessive windfall.
The compensation package, originally approved by shareholders in 2018, was designed to reward Musk for Tesla’s extraordinary growth. However, Tornetta argued that the package was the result of improper influence by Musk, accusing him of “unjustified enrichment” and claiming that the board, composed of Musk’s close associates, failed to act independently.
Musk defended the deal during the 2022 trial, arguing that Tesla’s investors were sophisticated and had oversight of his management. He maintained that the company’s turnaround was due to the success of Tesla’s Model 3 and denied having a direct role in negotiating his pay.
As the case continues, Musk has reignited debates over corporate governance, with some users on X advocating for companies to leave Delaware, a state known for its corporate-friendly laws, where two-thirds of Fortune 500 companies are incorporated.
