Elon Musk's $56 Billion Pay Deal Struck Down Again by Court
Tesla CEO Elon Musk’s record-setting $56 billion (£47 billion) compensation package has been rejected for the second time by a Delaware court, following a months-long legal battle. Despite being approved by Tesla shareholders and directors in 2018, the court has ruled against reinstating the controversial deal.
Judge Kathaleen McCormick reaffirmed her January decision, citing excessive influence by Mr. Musk over Tesla’s board members during the approval process. She deemed the compensation package, touted as the largest ever for a public company executive, to be unfair.
Reacting to the verdict, Musk voiced his frustration on X (formerly Twitter): “Shareholders should control company votes, not judges.” Tesla has vowed to appeal the ruling, calling the decision a “mistake.” In a post on X, the company added: “If this ruling stands, it places control of Delaware companies in the hands of judges and plaintiffs’ lawyers, not shareholders.”
In her written opinion, Judge McCormick criticized Tesla’s legal arguments as “creative” but unconvincing. While 75% of shareholders voted in favor of the package, she ruled that their approval could not retroactively validate such an extraordinary payout under these circumstances.
The judge also ordered Tesla to pay $345 million in legal fees to the shareholder who brought the lawsuit. However, she rejected the plaintiff’s additional demand for $5.6 billion in Tesla shares.
Corporate governance experts have praised the decision, emphasizing its importance for safeguarding investors. Charles Elson, a governance scholar at the University of Delaware, described the ruling as “well-founded,” highlighting key issues with Tesla’s handling of the deal.
“You had a board that wasn’t independent, a process dominated by the CEO, and a pay package that was completely out of proportion. That’s a troubling combination,” said Elson.
If upheld, this ruling could set a precedent for how conflicts of interest are handled in Delaware, where many major companies are incorporated. For now, the decision signals a victory for those advocating for stricter oversight of executive compensation in corporate America.
