Elon Musk has failed in his bid to reinstate the $56 billion pay package he was awarded as Tesla’s CEO in 2018. A Delaware court upheld an earlier ruling, which deemed the compensation plan improper. The decision, made by Chancellor Kathaleen McCormick, blocks Musk’s attempts to have the package reinstated. In response, Tesla said it plans to appeal, while Musk took to X (formerly Twitter), where he called the ruling “absolute corruption.”
Judge Cites Flawed Process in Pay Package Approval
The 2018 compensation deal, which would have made Musk the highest-paid CEO in U.S. history, faced significant legal challenges due to the way it was negotiated. McCormick had previously ruled that Musk controlled Tesla to the extent that he dictated the terms of his own pay package to a board that did not engage in fair negotiations. In her view, the process behind approving the compensation plan was “deeply flawed,” as the board had effectively been a rubber stamp for Musk’s demands.
Despite efforts by Tesla to sway the court by citing a shareholder vote in June, which ratified the pay plan, McCormick refused to reconsider her decision. “Even if a stockholder vote could have a ratifying effect, it could not do so here,” McCormick wrote, underlining that reopening the case based on new facts after trial would undermine the integrity of legal proceedings.
Attorney Fees and Legal Win for Shareholders
Alongside the ruling, McCormick also approved a $345 million attorney fee for the lawyers representing Tesla shareholders who had initially challenged Musk’s pay package. These attorneys, from Bernstein, Litowitz, Berger & Grossmann, expressed satisfaction with the outcome, praising McCormick for preventing further delays in the case. “We are pleased with Chancellor McCormick’s decision to bring clarity and avoid prolonging the uncertainty in this case,” the firm said in a statement.
Musk and Tesla’s Move to Texas
Musk’s dissatisfaction with the Delaware court system has been apparent throughout this legal battle. After the January ruling, he criticized Delaware’s legal framework, posting on X that no company should incorporate there. This sentiment led Tesla to hold a shareholder vote to move its headquarters to Texas, which was formalized in June. Musk’s SpaceX followed suit, moving its incorporation from Delaware to Texas as well, signaling a broader shift in his companies’ legal and operational bases.
Musk’s Wealth Grows Amid Legal Challenges
Despite the ongoing legal battles, Musk’s wealth continues to grow. Over the past month, he has seen his net worth increase by $43 billion, excluding the disputed pay package. Tesla’s stock has surged by 42% since the November U.S. presidential election, fueled by speculation that Musk’s influence with the incoming administration could benefit his businesses. As of the most recent market close, Musk’s Tesla stock is valued at approximately $150 billion, making him one of the richest people in the world. If the original pay package were still valid, it would now be worth an estimated $101.4 billion.
The legal struggle surrounding Musk’s pay package has raised important questions about corporate governance. Critics argue that the massive compensation plan reflects a lack of accountability, with Musk having too much influence over the Tesla board. McCormick’s ruling could set a precedent, emphasizing the importance of fair and transparent processes in executive compensation decisions.
