A Delaware judge ruled on Monday that Tesla CEO Elon Musk is still not entitled to his $56 billion compensation package, despite shareholders voting in June to reinstate it. Tesla issued a statement on X (formerly Twitter), calling the ruling “wrong” and announced plans to appeal. Musk also criticized the decision, stating shareholders, not judges, should control company votes. Following the ruling, Tesla’s stock dropped 1.4 per cent in after-hours trading.
Chancellor Kathaleen McCormick of the Delaware Court of Chancery upheld her January decision, which deemed the pay package excessive and rescinded it, raising uncertainty about Musk’s future at Tesla.
Musk’s 2018 pay package, which was tied to performance and valuation goals, originally valued at $56 billion, is now worth about $101 billion after Tesla’s stock surged by 42% since early November.
However, McCormick ruled that Musk had too much control over the negotiations, creating a conflict of interest. She rejected Tesla’s argument that the June shareholder vote, which supported Musk’s pay, should validate the package.
McCormick also pointed out that Tesla made misstatements in its proxy statement, making the vote insufficient to reinstate the pay.
Tesla issued a statement on X (formerly Twitter), calling the ruling “wrong” and announced plans to appeal. Musk also criticized the decision, stating shareholders, not judges, should control company votes. Following the ruling, Tesla’s stock dropped 1.4% in after-hours trading.
McCormick also awarded $345 million in attorney fees to the plaintiffs, a significant sum but less than the $6 billion initially requested. Tesla and Musk now plan to appeal the decision to the Delaware Supreme Court, which could take up to a year to resolve.
This ruling further emphasizes the tension between corporate governance and shareholder interests, as Musk’s supporters argue that shareholders’ votes should hold more weight than judicial decisions.
(With Reuters Inputs)