A U.S. judge has reaffirmed her decision to strike down Elon Musk’s $55.8 billion Tesla compensation package, rejecting Tesla’s attempt to validate the deal through a shareholder vote.
The ruling, issued by Chancellor Kathaleen McCormick of Delaware’s Court of Chancery, marks a significant blow to Tesla’s efforts to reinstate the controversial pay package.
In her court filing, McCormick criticized Tesla’s June shareholder vote to ratify the compensation plan, citing “material misstatements” in the documents provided to shareholders.
“The motion to revise is denied,” McCormick wrote.
She added that Tesla’s defense presented “unprecedented theories” that contradicted established legal precedents.
Tesla announced plans to appeal the decision, with Musk stating on his X social media platform, “Shareholders should control company votes, not judges.”
The case also involved a dispute over legal fees, with the court awarding $345 million to attorneys for plaintiff Richard Tornetta, a Tesla shareholder.
This was significantly lower than the $5.6 billion initially requested.
McCormick deemed the larger sum an “excessive windfall,” though she acknowledged that the calculation was consistent with Delaware law.
The original pay package, approved by shareholders in March 2018, was designed to reward Musk for Tesla’s rapid growth.
However, Tornetta’s lawsuit argued that the package was excessive, alleging that Musk dictated its terms to a board lacking independence.
The lawsuit accused Musk of “unjustified enrichment” and sought the annulment of the compensation plan, which helped make Musk one of the richest individuals globally.
During a 2022 trial, Musk defended the pay package, stating it was crucial for Tesla’s turnaround.
He denied any involvement in negotiating the terms, asserting that the company’s success with the Model 3 marked a pivotal change in its fortunes.
Delaware’s Court of Chancery, a key institution in U.S. corporate law, oversees cases involving many Fortune 500 companies, including Tesla.
Following the decision, Musk reposted comments on X urging companies to leave Delaware.
AFP
